HP revenues plunge as enterprise budgets tighten
The PC and print vendor, which plans to axe 6,000 jobs over three years, blamed 'industry-wide headwinds'
HP Inc. reported a loss in its fiscal 2023 Q1 with CEO Enrique Lores pointing the finger at "industry-wide headwinds".
He said corporate budgets being tightening has started to impact large enterprise demand for the vendor.
GAAP net revenues came in at $13.8bn, representing an 18.8 per cent slump from the $17bn earned in Q1 2022.
While GAAP net earnings plunged 55 per cent to $500m compared to the previous year's $1.1bn.
"We delivered on our non-GAAP EPS target despite industry-wide headwinds, reflecting disciplined execution across our business," Lores said.
"The Future Ready plan we announced last quarter is having an immediate impact, as we continue to reduce our costs while maintaining investments in long-term growth."
First quarter GAAP diluted net EPS was $0.49, down from $0.99 in the prior-year period and within the previously provided outlook of $0.47 to $0.57.
HP's Future Ready ploy focuses on two primary objectives - to further reduce cost structure and continue to assess and optimise its overall portfolio to develop the required operational capabilities to deliver long-term sustainable growth.
The vendor announced plans to cut between 4,000 to 6,000 people from its workforce by 2025 after a tough Q4 earnings report showed a year on year revenue drop of 11.2 per cent to $14.8bn.
In Q1 2023, Lores revealed HP delivered on its cost target for the quarter, adding it is on track to provide at least 40 per cent of its three-year savings by the end of fiscal year 2023.
HP "doubling down" on services and subscriptions.
Breaking down its earnings into business segments, HP's said its hybrid work arm more than doubled year on year following its $3.3bn acquisition of videoconferencing giant Poly in August.
"We are also doubling down on services and subscriptions. There is growing demand for new consumption models that allow us to deliver a better value proposition. And we have created dedicated teams to drive greater focus on these growth opportunities," HP's boss said during an earning webcast transcribed by Seeking Alpha.
The vendor saw soft demand in consumer and commercial for its personal systems business, which fell 24 per cent year on year to $9.2bn.
The group also experienced pricing pressure given elevated channel inventory across the industry.
End-user vs. channel demand
On top of this, HP felt the sting of tighter corporate budgets starting to affect large enterprise demand.
"Sellout to our customers was higher than selling to the channel with a corresponding reduction in channel inventory. Our estimate is that end-user demand was stronger than revenue shipments," Lores said.
The vendor head stated the company does not expect a significant economic recovery during fiscal year 2023.
Rather, it predicts its second half performance to improve relative to the first half, driven by HP's cost-saving measures and improved channel inventory levels creating a more normalised pricing environment.
"The PC market in units may regress to pre-Covid levels in the short-term, but we expect it will remain at a structurally higher level with more premium and high-value mix," Lores forecasted.