HP to Restructure Lucrative Printing Business

HP (HPQ) will reportedly revamp its printing unit in an attempt to jump start growth.

According to the Wall Street Journal, HP is looking to cut five printing divisions to three. The Idaho Statesman first reported the story.

HP’s plan is to make the printing unit more efficient and able to adapt to consumers and businesses that are printing less.

It’s unclear whether HP’s printing restructuring will involve a lot of additional layoffs. Despite the restructuring, HP’s printing business isn’t hurting. It’s one of HP’s most profitable units.

This slide, from HP’s latest earnings presentation, shows how the printing division’s growth has stalled, but operating profit is at its highest point in eight quarters. Overall, HP’s latest quarter was solid across the board.

HP’s technology solutions group matches the printing unit’s operating profit, the margins are lower.

Nevertheless, HP needs to adjust to a shifting printer market. HP has grown its commercial printing business and is cutting costs while investing in new areas. On HP’s earnings conference call, HP CEO Mark Hurd maintained that the printing group “had a strong quarter,” but also noted that the group’s portfolio of business is shifting as it is cutting costs.

Comments

[CrowTRobot]

Over the years, HP has gotten worse with software support for older printers. You buy a new HP printer, use it a year or so, upgrade your operating system to the latest, and then find that HP no longer supports your printer. I currently own an officejet 7110 and a color laserjet 1500L, but in the future, I won't be buying an HP printer again.

[AAA]

HP has a portfolio of businesses including portable computers and must maximize profitability in other business units such as printing which might not be the core of the company bottom line in the future. That's why they cut costs on R&D to find additionnal growth on existing research project before growth start going downhill.

Restructuring better be effective, but I trust management on that one. However, I wouldn't own HP right now, decrease in consumer spending is going to hurt...maybe that's why they do the hardwork inside the firm right now.