HP Recovery Is On Track
Chris Lau, Kapitall: Computer makers benefit whenever Intel (INTC) refreshes its lineup of processors. Even though IDC reported a 13.9% decline in PC shipments in the first quarter, the hardware refresh brings renewed interest in companies like Hewlett Packard (HPQ). There are signs that HP could return to higher margins in PCs. Meg Whitman said during its earnings call that the company would not be following Dell into a price war. Whitman said “you have to balance this [market share] with profitability and it’s a balance we focus on every day and every week.”
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HP re-entered the tablet market by offering Android-based devices. After launching the Chromebook in February, 2013, the company released the Slate tablet. The 7-inch device is powered by an ARM (ARMH) processor and sells for $169. Sales from tablets have an even worse margin than that of PC sales, but HP may pitch a broad array of products it has to offer to its customers.
Hybrid Mobile Devices
The HP Slate Book X2 release suggests the PC giant will focus back on premium devices. The X2 is an Android hybrid device powered by an NVIDIA (NVDA) Tegra 4 processor.
Better Margins in Quarter
HP reported solid margins in printing (15.8%), enterprise services (2.6%), software as a service (19.1%), and even personal systems (3.2%). Overall non-GAAP gross margins were 23.7%. The results were helped mostly from printing, but hurt by an unfavorable mix and higher prices for consumer hardware. Non-GAAP operating margin was 8.6%.
HP earned $2.4 billion in operating profit. The company continues to focus on cost cutting and efficiency, so investors should expect margins to improve in all segments of HP’s business.