What's going on?
HP gave a disappointing – but not surprising – quarterly update earlier this week.
What does this mean?
Looks like PCs are falling out of fashion: industry analyst Gartner said global shipments dropped 13% between April and June, marking the sector’s worst quarter in over nine years. And spare a thought for poor HP, which saw the biggest decline in shipments out of all the companies tracked over that time period. So it’s not a huge surprise that the PC maker saw sales of its consumer computers fall 20% last quarter from the year before, mainly led by sales of its notebooks falling by nearly a third. HP’s printer sales didn’t help either, falling by 6% as supply shortages continued to plague the division. And sure, sales of the company’s commercial PCs rose by 7% last quarter, but that wasn’t enough to save its overall revenue from falling a worse-than-expected 4%.
Why should I care?
Zooming in: Business isn’t booming.
Those commercial PCs have been buoying up HP’s falling consumer sales for a while, but that might soon come to an end: the company said business customers are starting to cut down on spending – and ramping up hiring freezes – to survive in an increasingly dire economy. On top of that, HP said it’s expecting evaporating consumer demand to continue for at least a couple more quarters. So left with little choice, HP cut this year’s profit outlook to below analysts’ expectations.
For markets: Investors are logging off.
Rival Dell also gave a disappointing outlook last week, citing many of the same issues that troubled HP. That’s not what investors banked on when they swapped high-flying tech stocks for PC makers earlier this year, keen to snap up their growth at much lower valuations. But they’re heading for the exits now: Dell and HP have seen their stocks fall 13% and 11% in the last month, much worse than the tech-heavy Nasdaq 100 index’s 4% dip.