HP Inc (NYSE:HPQ) Remains A Leader in the Flat Lining PC Industry

HP Inc (NYSE:HPQ) announced its fourth quarter results on Tuesday last week, which surprisingly met analysts’ expectations to mark the end of an amazing fiscal 2017. The company was billed as a stagnant legacy company when it was split from Hewlett Packard Enterprise Co (NYSE:HPE) in November 2015, but it has proven to be a gem in the PC industry.

Article Summary

HP Inc recently reported Q4 2017 results, which beat analysts’ expectations.

The company has emerged as a market leader in the flat lining PC industry.

HP’s printing business has higher margins and could be more valuable as a spin-off.

Here’s the trading report on HPQ.  

At the time of the split, HP Inc was largely seen as a deteriorating company, which was serving the declining PC and printing business, while HPE was categorized as being a growth company. However, the fortunes of the two companies have since reversed as HPQ has established itself as a leader in the mature PC and printing businesses, while HPE has been struggling to remain profitable.

HPQ’s recent results indicated that the company has outpaced its main competitors in the PC manufacturing industry, which are Lenovo and Dell, which were number 2 and 3 respectively. The company recorded slight growth in PC sales despite the flat lining nature of the industry as global demand for PC’s slowed down.

The company launched new PC models such as the HP Spectre 13 and the Spectre x360, which target the premium laptop market allowing it to compete effectively with Apple Inc. (NASDAQ:AAPL). The new high-end laptop models launched in October complement the mid-tier HP Envy line of products as well as the lower-end HP laptop brands.

The company’s differentiated product line-up, which serve consumers at all price levels, is what has enabled it to surpass Lenovo as the number one PC and laptop manufacturer. However, the company’s management revealed that it would be difficult to replicate the double digit growth figures achieved in the past two quarters as the global PC market is flat lining.

HP Inc.’s printing business also recorded significant growth as it contributed about 36% of the company’s revenues as compared to the 64% of revenues that were attributed to the sales of personal systems.

Some analysts believe that HP’s printing business should be spun-off from the PC business, which is highly commoditized. These analysts believe that the printing business is more valuable given that its boasts of higher margins when compared to the PC business; hence, the printing business could trade at a higher P/E ratio as a separate entity.

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