Monday, November 30, 2009

HPQ Q42009 Printer Metrics and commentary

I have been away for a few days, so missed a prompt update on HP's announcement of quarterly results, which took place Monday, November 23rd. However, here are the summarized metrics for the Imaging and Printing Group (IPG), as well my first impressions as I get caught up on the announcement and related materials.

HP CEO Mark Hurd was quite enthusiastic about printing overall, with the presentation "Key Messages" slide claiming "IPG poised for recovery". Clearly, profits held strong, despite a number of decreases continuing on quarterly top-line unit and revenue numbers, as seen in the spreadsheet below. Obviously, as supplies continue to dominate by exhibiting lower y/y decreases than hardware (8% versus 27%), and comprised nearly 70% of overall IPG revenue in the fourth quarter of 2009. (It seems not that long ago when supplies breached the magic "50% mark".)

Other impressions? Hurd's reputation for operational efficiency is evident in the numbers as well as remarks, including this passage from an answer to a question regarding expected growth in supplies and hardware from Katy Huberty, of Morgan Stanley, as contained in the earnings call transcript.

I think, Katy, let me go up a level for you. In many ways, the tough market has been a blessing for IPG. The business is now run with stronger operational rigor than we've ever had before. As Cathie mentioned, the inventory's been leaned out. Sales in and sales out are continuing to converge. We've made progress on the cost structure. Clearly we have more work to do. To the point of the question printer demand is picking up. And we plan to grow printers materially double digits in printer units in Q1. While staying within the operating margins. A little bit will depend on what the demand looks like and how we go for the printer unit growth. We will trade off operating profit dollars no question about it. What we're talking about doing, we couldn't have done it a year and a half ago. We simply couldn't have done it at the magnitude that we are going to do it. Frankly, that the -- in a strange way the 2009 situation was a positive for us and we knew this was coming as we said through 2009, we saw strong page performance and strong supply usage through 2009.


And on the opportunities for IPG? From the prepared remarks, as reported in the transcript, Hurd identifies three areas beyond the basic printer and supplies outlook improving (with my bolding):

IPG is poised for recovery and is getting on the attack. As we enter fiscal year 2010, the headwinds in channel inventory are behind us. We expect supplies growth to improve with economic trends, and employment levels and project a flattish result in Q1. Demand is also improving for our printers. We gained share sequentially and we expect to drive further share in installed base gains with double digit printer unit growth in Q1. Due to improvements in our cost structure we can do this while remaining within the 15 to 17% operating margin that we laid out at our analyst meeting in September. IPG is also gaining significant traction with its growth initiatives. We deployed hundreds of photo kiosks this quarter at Wal-Mart and look forward to further expansion in 2010.

Recent studies released by market analysts highlight HPs leadership in managed print services with more signings than any of our competitors. We're encouraged by our Managed Print Services funnel, which is at record levels, these deals are generally for multiple years and have a high attach rate of supplies. In commercial print the analog to digital page shift is occurring and we are leveraging our technology to accelerate the transition. Partnerships with industry leaders like Pitney Bowes, RR Donnelly, and web press purchases from communication leaders, Omnicom demonstrate the power of our portfolio and capabilities. We expect you will hear more partnerships from us shortly.With our significant market leadership and broad patent portfolio, we are well positioned to capture this significant page opportunity.


Interesting to note that despite the optimism, Indigo page growth, at 13%, was at its lowest mark since it began being reported several years ago. (Though, in fairness, anything UP 13% in these economic times is pretty impressive!)

7 comments:

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