HP flags reduced profit, cash outlook as PC woes drag on

NEW YORK - Hewlett-Packard (HP) reduced its full-year cash flow and profit outlook, saying a rebound in the market for personal computers (PC) will take longer than expected.

Free cash flow for the fiscal year ending October will be US$3 billion (S$4 billion), the company said on Tuesday in a statement. It previously projected about US$3.25 billion.

HP also reduced its adjusted profit forecast to a range of US$3.23 to US$3.25 a share from US$3.30 to US$3.50 a share.

Demand is “not improving as quickly as we were expecting”, chief executive Enrique Lores said in an interview.

Elevated levels of inventory across the industry means that computer pricing remains suppressed, and business customers put off purchases in the quarter due to job cuts and general cost-consciousness, Mr Lores said. The economy in China is also weighing on sales, he added.

PC sales

have experienced a historic decline over the last year

following a pandemic-era boom. HP had been hopeful that the second half of 2023 would see quicker improvement with sales boosted by the back-to-school and holiday seasons.

Industry analyst Gartner said in July that the PC market was showing signs of stabilisation. Instead, the reduced outlook indicates ongoing unpredictability.

HP’s fiscal third-quarter revenue dropped 9.9 per cent to US$13.2 billion, falling short of analysts’ average estimate of US$13.4 billion.

Consumer PC sales declined 12 per cent, better than anticipated, while sales to businesses were down 11 per cent, worse than expected. The softer commercial results reinforced concerns about extended tight corporate technology spending, Bloomberg Intelligence analyst Woo Jin Ho said in a note after the results.

Printing revenue fell 7 per cent to US$4.3 billion. Analysts, on average, expected US$4.57 billion, according to data compiled by Bloomberg. Adjusted profit was 86 US cents per share, in line with estimates.

Despite being “in a tough market environment”, Mr Lores touted a report from industry analyst IDC showing HP gained on its rivals in the quarter.

“The rebound has started to happen, it just will be less accelerated than we expected a quarter ago,” he said.

HP shares tumbled 6.4 per cent to US$29.35 in extended trading in New York. The stock had gained 17 per cent in 2023 through Tuesday’s close. BLOOMBERG