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The current restructuring at @HP is concerning but a necessary evil. IMHO while there is no doubt that HP will look better post this phase & also generate sufficient cash in the near term, the concern is more long term & whether the company has enough muscle to be relevant?? pic.twitter.com/M2VNoDlQTO
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
IMHO The personal computing market is tough and with significant change in device usage, companies like @HP @Dell @Lenovo should be concerned – fact is that this is a low-margin, high volume business and beyond a point, the growth will plateau.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
Some of the names I mentioned in the previous tweet continue to ‘stuff’ enterprise and government deals with laptops & desktops but the fact that there has been little breakthrough innovation in form factors from their end, makes their relevance in the long run questionable.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
Not to miss, these OEMs are also having to fight aggression from @Apple & recently @surface that are clearly offering better experience for customers willing to dish out a premium for their devices – especially Surface that has done a lot lately to make design as a key pull.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
Back to @HP, the move to break them away from @HPE didnt quite deliver on the objective they set out to achieve – fact is, there are synergies across both companies & sufficient overlap in channels as well – @Dell & @Lenovo do this well all under one roof@- especially former
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
IMHO most worrying part of this is that @HP stock has been rather choppy for a year now – early signs were Dec’18 and then again in Mar’19 – the board could have moved in on the situation earlier as well to savage and cut losses – may be they did, but it’s clearly not enough pic.twitter.com/7zzeAs8Bbl
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
IMHO another major default by companies like @HP is using the Gillette model to sell printer cartridges – the category has anyways declined significantly over the past few years and prohibitive prices of original cartridges has only meant the users are wary about investing..
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
IMHO key here for cos like @HP @Dell and others is to build an ecosystem play to ensure third-party supplies are legitimatised and cheap tricks to use sensors that don’t allow for this currently is stopped – tbh these are tough decisions and never easy to pull the plug on 💰
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
Another critical point to note here – per the company, @HP expects $3 billion fresh cash flow in fiscal 2020 & bulk of the savings will be in corporate functions, back-office support – IMHO additional costs could have been avoided had they stayed under the same roof as @HPE.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
There are 2 other worrisome points that need mentioning:
(1 of 2) HP will raise prices for printers that can be used with non-HP ink cartridges.
IMHO wrong of @HP to assume they can reverse consumer behaviour >> this may mean short-term profits at long-terms loss of share.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
(2 of 2) @HP will offer some lower-priced printers, but employ new technologies to ensure they are only compatible with HP ink.
IMHO the market feedback on this is already poor and the cost of fulfilment of such a model is simply not scalable nor profitable in the long-run.
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
IMHO this decline isn’t unique to @HP and is an industry trend that points to a more worrying state of affairs across key players.
To put this in perspective, here’s how the stock has performed over past years for @ASUS @Lenovo & @Acer.
Stocks don’t lie, but bare it all.. pic.twitter.com/v4lnkOYDVa
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
There's a still a cloud of confusion about the extent to which @HP will recover, but IMHO imp to put this development in context & no better figure than market capitalization. In one year from USD 42 Bn to USD 24.36 Bn.
Complete recovery will mean a long, rough road ahead. pic.twitter.com/mXpFVrq6s8
— Sanchit Vir Gogia (@s_v_g) October 7, 2019
Analyst:
Sanchit Vir Gogia: Sanchit is the Chief Analyst, Founder & CEO of Greyhound Research, a Global, Award-Winning, Technology & Innovation Research & Advisory firm. To read more about him, click here.
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