HP Inc claims demand for Windows 10 is weaker than expected

PC business slumps annually but channel stock is no longer like "rotting fish", HP exec insists

HP Inc has said Windows 10 has not sparked the "demand we would have hoped for" in the PC market, but insisted its channel inventory is still healthy and no longer like "rotting fish".

HP Inc reported its first quarterly results as a separate company last night. HP split into HP Inc and Hewlett Packard Enterprise on 1 November and the latter will report its first-ever results next Thursday.

For the three months to 31 January, net profit at HP Inc hit $592m (£425m), down 57 per cent annually, on sales which fell 12 per cent over the same period to $12.1bn. Personal systems net sales were down 13 per cent, while printing revenue slumped 17 per cent.

HP Inc's chief executive Dion Weisler (pictured, below) remained confident about the company's place in the PC market.

"It's a continuous evolution," he said on the earnings call. "As market leaders, we are looking to evolve and create new categories. Look at the work we did this week in Mobile World Congress with the Elite x3 [business mobile phone launched this week]. That's a terrific example of category creation. It's a new mobile solution, but it's not a PC, it's not a phablet, it's not a notebook; it's all three.

"So the PC lines are being redrawn at the moment. And our goal, as it has been consistently for the past three years, is to gain profitable share. We choose to play in certain areas; we choose not to play in other areas. So we have a fairly consistent formula here. We segment the market. We continue to drive innovation into the system, and we're not after share for share's sake."

The PC market has had a volatile new years - in 2014, PC sales were buoyed when the end of Windows XP encouraged businesses and consumers to upgrade their devices. But once the so-called XP effect wore off, sales fell again.

Last year's arrival of Windows 10 is expected to boost the market yet again, analysts predict, but Weisler gave the OS a more lukewarm review.

"While I still believe Windiws 10 is a tremendous operating system platform, and Universal Apps and continuing computing make devices such as the Elite x3 a reality, we have not yet seen the anticipated Windows 10 stimulation of demand that we would have hoped for," he said.

"We are carefully monitoring any sort of price developments that could further weaken demand. So we're operating in a still large market. The big guys are getting bigger, and we think there is opportunity in that landscape."

Despite the weaker-than-expected demand and fall in PC sales, HP Inc insisted that its channel inventory remains healthy.

HP Inc's chief financial officer Cathie Lesjak said: "I think Dion at one point alluded to [our] aged channel inventory as rotting fish. We're not in that situation. We are actually in a very nice position. That may be different than some of our competitors out there, where we're hearing that there is still a fair amount of channel inventory. So I think we're well positioned."