Printers and Enterprise Servers Expected to Drag on HP Sales

By Jessica Davis  |  Print this article Print

Hewlett-Packard (NYSE:HPQ)'s Q2 earnings are expected to reveal a bleak picture for sales of printers, printing supplies, and enterprise servers and storage. HP watchers are expected to pay particular attention to how well HP did in reducing its channel inventory for its Imaging and Printing Group.

All eyes are on Hewlett-Packard (NYSE:HPQ) this afternoon as the technology giant—a bellwether for other companies in the personal computer, server and printer spaces, among other technologies—announces its second-quarter earnings.

And the news looks to be bleak for printing and enterprise servers and storage.

As business and consumers continue to delay the purchase of new PCs, servers, printers and other technologies, revenues may very well come in lower than Wall Street analysts’ consensus estimates. So says Toni Sacconaghi, senior analyst at Bernstein Research.

The firm is forecasting Q2 revenues for HP to be $27.1 billion, a 13.2 percent year-over-year decline excluding currency issues and the EDS acquisition. That compares with a 13.1 percent year-over-year decline reported by HP in Q1.

"Consistent with other IT hardware vendors, we expect year-over-year growth rates of ESS (Enterprise Storage and Servers) and printing to weaken sequentially, despite April having been a stronger month than January," writes Sacconaghi in a brief report previewing HP’s earnings and issued ahead of HP’s earnings release. "However, given strong share gains, we believe that the PC division’s year-over-year growth rate in constant currency will improve modestly."

Bernstein, like several other analyst firms, says things still look bleak for the printing business in Q2.

"However, we continue to believe that recent declines in both printer hardware and supplies revenue growth are largely cyclical," writes Sacconaghi. He points out that HP said it will be lowering channel inventory in IPG (Imaging and Printing Group) in Q2 and Q3 and that printer results from Lexmark, Xerox and Canon reflect a difficult and decelerating environment for that market, especially in laser printer products. HP’s IPG inventory grew from one week to a staggering estimated six and a half to seven weeks in Q1. Sacconaghi believes HP may have reduced IPG inventory by as much as three to four weeks in Q2.

Sacconaghi further notes that imaging companies are remaining conservative in their outlooks.

On the bright side, however, Sacconaghi says that channel checks and field contacts, particularly in the United States, are pointing to a bit of a rebound in demand for HP products.


Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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