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CEO Weisler: HP Desktop PC Business Is Seeing A 'Resurgence'

Unit sales of desktop PCs outpaced notebooks during HP’s fiscal third quarter, as both personal systems and print generated double-digit revenue growth.

Both desktop and notebook PC sales are helping to drive "strong growth" for the personal systems business at HP Inc., CEO Dion Weisler said Thursday as the company reported its latest quarterly financial results.

While the transition from Windows 7 to Windows 10 is providing "some stimulation" to PC sales at HP, continued innovation is the main force enabling HP to outperform the overall market, Weisler said during a conference call with reporters and analysts.

[Related: 5 Takeaways From HP Execs On Product, Channel And Diversity]

Even desktop PCs—far from showing signs of imminent demise—were a bright spot for HP during the company's third fiscal quarter, which ended July 31. Desktop unit sales actually outpaced notebook sales for HP during the third quarter, with 7 percent unit growth for desktop PCs compared to 6 percent unit growth for notebooks.

"I think consistently now we've demonstrated that we've turned around our desktop business," Weisler said after a question from CRN during the conference call Thursday. "We've seen a resurgence from our reinvention of personal systems. Notebooks led the way, and so the compares are a little tougher in that area."

The growth in desktop PC sales, Weisler said, is "just another proof point of segmenting the market, listening to our customers, driving off of insights and developing a portfolio that's really resonating with our customer base. And we're seeing that turn up in the results."

The PC results contributed to HP's overall third-quarter revenue of $14.59 billion, an increase of 12 percent from $13.06 billion during the same period a year earlier.

For the seventh consecutive quarter, Palo Alto, Calif.-based HP saw double-digit revenue growth in both the personal systems and print segments. Personal systems rose 12 percent to $9.39 billion in sales for the quarter, while print climbed 11 percent to reach $5.19 billion in quarterly sales.

"For us it's an outcome of incredible innovation, and cost management and execution from all areas of the business," Weisler said during the conference call with reporters and analysts.

The results also stem from "our focus on growth in strategic areas of premium and commercial and gaming and retail," he said. "There's no single magic pill there. It's delivering against our strategy."

In print, the inclusion of Samsung's printer business helped to generate commercial hardware growth of 24 percent during the fiscal third quarter over a year earlier, with commercial hardware revenue reaching $1.17 billion. Supplies revenue was up in the third quarter, as well, with 8 percent growth to $3.4 billion.

Notebook PC revenue increased 13 percent year-over-year, coming in at $5.63 billion. Desktop PC revenue grew at nearly the same rate, with sales up 12 percent, to reach $2.86 billion.

"We continue to see strong demand for HP products across the board. They're continuing to differentiate themselves in the market, and that's paying off," said Skip Tappen, CEO at NWN, an HP partner based in Waltham, Mass. "Specifically around desktops and workstations, we're seeing strong demand there also."

In particular, Tappen said he's seeing major demand in premium products. "Premium continues to be a real value-add to the customers—they see that value and they're willing to pay for it," he said.

In terms of the outlook for personal systems at HP, "I have real confidence in this business over the long term," Weisler said.

The results came during a quarter that saw a changeover in HP's PC business leadership, with longtime HP executive Alex Cho taking over as president of HP's personal systems business in June. The succession followed the exit of Ron Coughlin, who departed in order to become the CEO of pet retailer Petco.

In an interview with CRN earlier this month, Cho said he fully expects HP to continue outpacing the market in PC sales. "We have a mantra--watching people and places allows us to create great products and solutions. That will keep the market and the innovations healthy,” Cho said. "We have still a lot of room to grow in share. We've gained a lot of share, and we've got a lot of room to grow."

The quarter also saw HP enter into an agreement to acquire Apogee, Europe's top multi-vendor managed print services provider, partly to help boost HP's share in the A3 print copier market. HP said the deal values U.K.-based Apogee at $499 million.

The acquisition of Apogee also "advances our ability and capability to extend our contractual business, which is really important to us," Weisler said.

He later added, "I'm confident in our ability to become a really strong and substantial player in that [A3] business."

"We made significant investments there with Samsung. That integration is going really well, so much so that we felt comfortable [that] it was the right time to continue our investment in this part of the business, with the acquisition of Apogee," Weisler said. "That'll help us bring these superior products and services to market."

Non-GAAP net earnings during HP's third fiscal quarter rose to $840 million, or 52 cents per diluted share, up from $735 million, or 43 cents per diluted share, during the same period a year earlier.

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