HP Inc.
HP Inc. - Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
Publication Date: Mar-2016
Company Snapshot
Company Overview
Key Information
HP Inc. (HP), formerly Hewlett-Packard Company, is an
information technology (IT) company, which provides a
comprehensive range of products, technologies, software,
solutions and services. The company’s product and service
portfolio includes personal computing and other access
devices; imaging- and printing-related products and
services; enterprise IT infrastructure; multi-vendor
customer services; and related software products and
solutions.
HP Inc., Key Information
Web Address
Financial year-end
Number of Employees
NYSE
www.hp.com
October
287,000
HPQ
Source : GlobalData
Key Ratios
SWOT Analysis
HP Inc., Key Ratios
P/E
4.52
EV/EBITDA
4.19
Return on Equity (%)
16.40
Debt/Equity
Operating profit margin (%)
HP Inc., SWOT Analysis
Strengths
Weaknesses
Research and Development
Activities
0.32
5.96.00
Dividend Yield
Patent Infringement Concerns
Business Performance:
Printing Segment
Operations in Diverse
Regions
0.06
Personal Systems Portfolio
Note: Above ratios are based on share price as of 15-Mar-2016
Source : GlobalData
Opportunities
Threats
Share Data
Product Launches
Rapid Technological Changes
HP Inc., Share Data
Strategic Collaborations
Competitive Environment
Global Printing Inks Market
Growing Trend of Paperless
Work
Price (USD) as on 15-Mar-2016
EPS (USD)
Book value per share (USD)
11.40
2.59
15.39
Source : GlobalData
Shares Outstanding (in million)
1,831.50
Source : GlobalData
Financial Performance
Performance Chart
HP Inc., Performance Chart (2011 - 2015)
The company reported revenues of (US Dollars)
US$89,907 million for the fiscal year ended October
2015 (FY2015), a decrease of 19.3% over FY2014. In
FY2015, the company’s operating margin was 6%,
compared to an operating margin of 6.4% in FY2014. In
FY2015, the company recorded a net margin of 5.1%,
compared to a net margin of 4.5% in FY2014.
The company reported revenues of US$12,246.0 million
for the first quarter ended January 2016, a decrease of
0.2% over the previous quarter.
Source : GlobalData
HP Inc.- Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
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HP Inc.
Key Information
HP Inc., Key Information
Corporate Address
3000 Hanover Street, Palo Alto,
CA, 94304, United States
Telephone
Fax
URL
Industry
+1 650 8571501
Locations
+1 650 8575518
www.hp.com
Ticker Symbol, Stock
Exchange
No. of Employees
Fiscal Year End
Revenue (in USD Million)
HPQ [New York Stock Exchange]
287,000
October
89,907.0
Clean Technology, Technology
and Telecommunication
Angola, Argentina, Australia, Austria, Bahrain, Barbados, Belgium, Bermuda, Botswana, Brazil,
Bulgaria, Canada, Chile, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark,
Ecuador, Egypt, Finland, France, Germany, Ghana, Greece, Guatemala, Hong Kong, Hungary, India,
Indonesia, Ireland, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Macau, Malaysia, Mexico,
Morocco, Mozambique, Netherlands, New Zealand, Nigeria, Norway, Panama, Peru, Philippines,
Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea,
Spain, Sweden, Switzerland, Taiwan, Tanzania, Thailand, Turkey, Uganda, United Arab Emirates,
United Kingdom, United States, Venezuela, Vietnam
Source : GlobalData
Company Overview
HP Inc. (HP), formerly Hewlett-Packard Company, is an information technology (IT) company, which provides a comprehensive
range of products, technologies, software, solutions and services. The company’s product and service portfolio includes personal
computing and other access devices; imaging- and printing-related products and services; enterprise IT infrastructure;
multi-vendor customer services; and related software products and solutions. The company offers its products to individual
consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and
education sectors. It has operations in the Americas, Europe, the Middle East, Africa and Asia-Pacific. HP is headquartered in
Palo Alto, California, the US. In November 2015, Hewlett-Packard Company separated its enterprise technology infrastructure,
software, services and financing businesses to form Hewlett Packard Enterprise Company. Following the separation,
Hewlett-Packard Company changed its name to HP Inc.
HP Inc.- Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
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HP Inc.
HP Inc. - SWOT Analysis
SWOT Analysis - Overview
HP provides personal computing, imaging and printing, software, solutions and services. A strong personal systems
portfolio and focus on research and development are the company’s strengths, even as patent infringement lawsuits and
declining performance of printing segment remains a cause for concern. Nevertheless, strategic collaborations and coupled
with growing demand for printing inks could present ample growth opportunities to HP. However, competition and rapid
technological changes could hinder its growth prospects.
HP Inc. - Strengths
Strength - Research and Development Activities
HP focuses on research and development (R&D), which helped it maintain and enhance its competitive position. The
company’s R&D focuses on designing and developing products, services and solutions that meets customers’ changing
needs, and incorporate emerging technological trends. It also strives to identify the areas in which it can contribute, and
partners with other leading technology companies to reduce its cost and maximize its customers’ experiences. HP Labs,
along with other group R&D centers, carries out the group’s R&D. HP Labs primarily focuses on the development of cloud,
security and information optimization solutions. It also works on several major areas such as mobility, content and printing,
sustainability, and future computing platforms and capabilities. The company operates HP Lab facilities in Haifa, Israel;
Bristol, the UK; and Palo Alto, the US. Currently, HP Labs is developing print & 3D technologies, security solutions, pattern
and anomaly detection, context aware fluid interactions, and other computing technologies. In FY2015, HP incurred
expenditure of US$3,447 million on its R&D activities, which as a percentage of revenue stood at 3.1%. As of FY2015, the
company’s worldwide patent portfolio included over 33,000 patents. Following separation, 15,000 patents were transferred
to Hewlett Packard Enterprise.
Strength - Operations in Diverse Regions
HP is one of the leading global providers of products, technologies, software, solutions and services to commercial and
consumers across government, health and education sectors. The company offers its products and services worldwide
through a strong network of direct sales force, retailers, resellers, distribution partners, original equipment manufacturers
(OEMs) and independent software vendors. Operations in diverse regions enables the company to meet the demands on a
global front for both consumer and enterprise customers; garner business and technical expertise from a global workforce;
operational stability; and revenue sources offsetting dependence on specific regions. The company operates its major
product development, manufacturing and data centers in Brazil, Canada, the US, France, Ireland, Israel, Germany, Spain,
the UK, India, Japan, Singapore, and Taiwan. Its major offices in Americas, Europe, Middle East, Africa and Asia Pacific
are in the US, Canada, Switzerland, Singapore and Japan. In FY2015, the company reported 63.6% of revenue from
outside the US and 36.4% from the US.
Strength - Personal Systems Portfolio
The company offers a robust Personal Systems portfolio, which provides it a competitive edge over its peers. HP’s
Personal Systems portfolio comprises a comprehensive range of commercial PCs, consumer PCs, workstations, thin client
PCs, tablets, retail POS systems, calculators and other related software and accessories. The portfolio includes
commercial PCs such as HP ProBook and HP EliteBook notebooks and detachable tablets; the HP Pro and HP Elite line
business desktops; retail POS systems; HP Thin Clients, HP ElitePad and HP Pro Tablet PCs. Its Consumer portfolio of
products includes HP Spectre, HP ENVY, HP Pavilion, HP Chromebook, HP Split and HP Slate series of notebooks,
hybrids and desktops. The PCs and tablet products integrate latest technologies from leading software and hardware
vendors such as Microsoft, Intel Corporation and Advanced Micro Devices, Inc. HP’s portfolio also consists of a
multi-operating system, multi-architecture feature by using Google Chrome and Android operating systems for notebooks
and tablets. An established Personal Systems portfolio enabled the company to become one of the top three vendors in the
global PC market. It has been ranked among the top five in the laptop market in China for several years.
HP Inc. - Weaknesses
Weakness - Patent Infringement Concerns
The company is involved in patent infringement issues, which led to litigations. Lawsuits, including regulatory actions and
patent infringement issues, may lead to adverse verdicts and recovery of large and indeterminate amounts or otherwise
limit its operations. In 2015, Memjet filed a patent infringement lawsuit against HP in the US District Court for the Southern
District of California, alleging infringement of eight its patents related to page-wide waterfall printing technology. Memjet
seeks both to enjoin HP from unauthorized use of its page-wide waterfall technology, and to recover damages resulting
from the use of technology in HP's PageWide printer products. In 2016, a favorable ruling was announced to lift a patent
infringement preliminary injunction by MEMJET. HP is also one of the several defendants in patent infringement lawsuits
filed by e.Digital asserting its US Patent No. 5,839,108. The patent is part of e.Digital’s Flash-R patent portfolio and
involves a method of memory management for non-volatile memory, such as flash memory. HP is a co-defendant in a
lawsuit filed by Cedatech Holdings LLC for infringing Cedatech’s patent by using speech recognition software in its
HP Inc.- Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
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HP Inc.
products. These matters could hamper the company’s growth as they exert financial burden on it in terms of fines,
penalties, and legal consultancy fees.
In FY2015, HP was also involved in patent infringement litigations with some of the IT companies such as Morpho Komodo;
Papst Licensing GmbH & Co. KG; Verifire Network Solutions, LLC; Fellowship Filtering Technologies, LLC; KW-2, LLC;
Realtime Data LLC; Frequency Systems, LLC; Raster Printing Innovations, LLC; Nonend Inventions, N.V.; Limestone
Memory Systems LLC; Industrial Print Technologies LLC; Nexus Display Technologies LLC; and Andrea Electronics
Corporation, among others. Patent infringement litigations are expensive to defend and can result in the award of damages
and injunctions that could prevent the manufacture and sale of products or force the company to make royalty payments in
order to continue selling the products under dispute.
Weakness - Business Performance: Printing Segment
The Printing segment is one of the major contributors to the company’s revenue. It accounted for 19.8% of the company’s
total revenue in FY2015. Declining sales from this segment hampers the growth of the company. The Printing segment
offers a wide range of consumer and commercial printer hardware, supplies, media, software and services, and scanning
devices to commercial and consumer markets. In FY2015, the segment reported revenue of US$21,232 million, registering
a decrease of 8.5% over revenue in the previous year. The decline in revenue could be due to currency impacts, decline in
supplies, weak market demand and competitive pricing pressures. The revenue from the Printing segment declined across
all regions, primarily in EMEA and Russia. Supplies, which account for approximately 66% of the segment’s total revenue,
declined 6.3% in FY2015 over that in FY2014. The revenue from Supplies decreased primarily due to low demand in toner
and ink particularly in EMEA and Russia. Printer unit volumes also declined 7% in FY2015 over that in FY2014 due to a
decline in LaserJet and home printer units. The average revenue per unit for Printers declined 7% in FY2015 over that in
FY2014 due to competitive pricing and unfavorable currency impacts on Inkjet and LaserJet printers.
HP Inc. - Opportunities
Opportunity - Product Launches
HP continues to develop innovative products to meet the growing needs of its customers. With a strong technology
foundation and insight into the requirements of its clients, HP is well positioned to deliver unparalleled value through
innovative products and solutions. In 2016, the company launched HP Chromebook 11 G4 Education Edition (EE), a
durable, lightweight Chromebook for students and educators. It has a spill-resistant keyboard which secures the
Chromebook from water-related accidents. It also includes smart features such as a 180-degree hinge, which enables it to
lay flat for easy view. It also announced enhancements to its consumer premium PC portfolio, which includes a 15.6 inch
diagonal version of HP Spectre x360 with features such as 4K display2 option, Audio by Bang & Olufsen, optional Intel Iris
graphics3 and enhanced battery life; OLED display option on its 13.3 inch diagonal HP Spectre x360; and new Pavilion
x2HP tablet with a 12.1 inch diagonal display. It also announced the launch of HP T730 Thin Client, the world’s first thin
client with native quad UHD/4K (1, 2) display support equipped with next-generation quad-core AMD processor.
Opportunity - Strategic Collaborations
The company maintains strategic collaborations with leading industry players which give it a competitive edge. These
collaborations generate capital for the company and strengthen its research and development activities. In 2015, the
company launched the first HP PageWide Web Press T1100S, in collaboration with KBA, a company which recreates
corrugated packaging printing for high-volume, digital pre-print applications. Digital printing is one of the fastest growing
segments in packaging with a projected annual growth rate of 17% in a market expected to be reach US$19 billion by 2019.
With this collaboration, the company could seek to amplify its revenue streams. DS Smith Packaging is the first customer to
install the 2.8 meter width (110-inch) press. The company also collaborated with HTC Corp to develop a certified virtual
reality (VR) ready desktop PC, the HP ENVY Phoenix, for gamers. HP ENVY Phoenix integrates Vive, a new VR system
developed by HTC which offers immersive VR experience with room scale tracking capabilities, combined with
photosensors on the headset and controllers, tracking user's movement within a 3D space. The collaboration with HTC
enhances gaming user experience.
Opportunity - Global Printing Inks Market
Growing global printing inks market could help the company expand its operations and enter new regions. The global
printing ink market is expected to reach US$18.19 billion by 2017. The demand is driven by factors such as growing
demand for environmentally friendly inks, technological advancements in new markets such as UV and ink jet inks.
Geographically, the US is expected to be the single largest regional market in terms of volume and value sales. In Europe,
the growing sales of UV, free radical and cationic inks are bolstering the printing inks market. Asia Pacific is expected to be
the fastest growing market for printing inks at a CAGR of 5.5 % until 2017, with China and India being the major growing
markets. Such potential market for printing inks could help HP undertake expansion and improve its revenue in the future.
HP Inc.- Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
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HP Inc.
HP Inc. - Threats
Threat - Rapid Technological Changes
The technology market is subject to rapid changes, and to compete effectively, the company must continually introduce
new products that achieve market acceptance. The IT industry is characterized by fast technological changes, evolving
industry standards, changing market conditions and frequent new product and service introductions and enhancements.
The introduction of products using new technologies or the adoption of new industry standards can make the existing
products or products under development obsolete or unmarketable. In order to remain competitive and in order to increase
its sales, the company needs to adapt to the rapidly changing business environment.
Threat - Competitive Environment
HP faces competition in all the segments it serves. It competes with well-established major corporations and a large
number of new and rapidly growing firms. The competitors in branded personal computers are Dell, Acer Inc, Apple Inc.,
Lenovo Group Limited, Toshiba Corporation and ASUSTeK. The major competitors in the Printing segment include Canon
USA, Inc., Lexmark International, Inc., Xerox Corporation, Seiko Epson Corporation, Samsung Electronics Co. Ltd., and
Dell. In most of the segments, competitors resort to price cutting measures, as a means to expand their market share. For
instance, Kodak competitively priced its printer ink price, even though HP and Epson increased their prices. Such fierce
competition in the markets served by the company could affect its business and market position.
Threat - Growing Trend of Paperless Work
Copier providers such as the company could be affected by the increasing trend of paperless work. Paper-related systems
and products are being replaced by digital content. The use of PCs, notebooks, mobile workstations, and Internet has
become an essential part of business operations. Emails and digital documents are increasingly replacing traditional means
of sending and storing information. The shifting trend to digitization of information could become a major challenge to
companies such as this.
NOTE: The above strategic analysis is based on in-house research and reflects the publishers opinion only
HP Inc.- Financial and Strategic Analysis Review
Reference Code: GDTC40468FSA
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