1 00:00:03,320 --> 00:00:06,720 Speaker 1: Global business news twenty four hours a day. If Bloomberg 2 00:00:06,760 --> 00:00:09,840 Speaker 1: dot com the radio plus Mobile act and on your radio, 3 00:00:10,119 --> 00:00:14,280 Speaker 1: this is a Bloomberg Business Flash Broom, Bloomberg World Headquarters. 4 00:00:14,320 --> 00:00:17,320 Speaker 1: I'm Charlie Pellett. Moments ago we heard from HP in 5 00:00:17,480 --> 00:00:20,640 Speaker 1: kit reported third quarter profit the top to analysts estimates 6 00:00:20,680 --> 00:00:24,440 Speaker 1: help by improving demand for laptops, but shares our trading lower. 7 00:00:24,760 --> 00:00:27,920 Speaker 1: It says profit excluding some items will be thirty four 8 00:00:28,000 --> 00:00:31,120 Speaker 1: to thirty seven cents a share in the current quarter. 9 00:00:31,200 --> 00:00:35,280 Speaker 1: Now that would fall short of analyst projections of forty cents. 10 00:00:35,760 --> 00:00:38,840 Speaker 1: A sell off in drugmakers dragged US stocks lawer today. 11 00:00:38,880 --> 00:00:43,120 Speaker 1: The SMP five hundred index down eleven to seventy five, 12 00:00:43,159 --> 00:00:46,600 Speaker 1: a drop of five tenths upon percent down, Industrials down 13 00:00:46,760 --> 00:00:49,560 Speaker 1: sixty five points to drop of four tenths of one percent, 14 00:00:49,840 --> 00:00:52,480 Speaker 1: and has stack down forty two, a drop of eight 15 00:00:52,600 --> 00:00:55,600 Speaker 1: tents of one percent. The tenure down three thirty seconds, 16 00:00:55,640 --> 00:00:58,640 Speaker 1: the yield one point five six percent, Gold down eighteen 17 00:00:58,720 --> 00:01:01,520 Speaker 1: ten the ounce the thirteen one four, a drop there 18 00:01:01,640 --> 00:01:05,680 Speaker 1: of one point four percent. West Texas Intermediate crewed down 19 00:01:05,720 --> 00:01:09,560 Speaker 1: a dollar thirty at a barrel at fourty six seventy one, 20 00:01:09,880 --> 00:01:14,760 Speaker 1: a drop there of two point nine percent. So again recapping, 21 00:01:14,760 --> 00:01:17,280 Speaker 1: we did see a down dave for stocks SMP five 22 00:01:17,360 --> 00:01:20,759 Speaker 1: hundred index falling eleven, a drop there of five tenths 23 00:01:20,800 --> 00:01:24,160 Speaker 1: of one percent. I'm Charlie Pellett. That's a Bloomberg business flash. 24 00:01:25,000 --> 00:01:28,480 Speaker 1: You're listening to taking stock with bin box at Kathleen 25 00:01:28,560 --> 00:01:33,319 Speaker 1: Hayes on Bloomberg Radio. Shares of HP are lower by 26 00:01:33,319 --> 00:01:35,920 Speaker 1: more than five and a half per cent right now 27 00:01:36,000 --> 00:01:39,920 Speaker 1: after reporting a third quarter results that were better than 28 00:01:39,920 --> 00:01:44,000 Speaker 1: analysts estimates. But looking into the fourth quarter, HP says 29 00:01:44,080 --> 00:01:47,600 Speaker 1: that earnings per share from continuing operations will be between 30 00:01:47,680 --> 00:01:52,360 Speaker 1: thirty four and thirty seven cents versus estimates of between 31 00:01:52,400 --> 00:01:56,160 Speaker 1: the thirty eight and forty four cents. Here to tell 32 00:01:56,240 --> 00:01:59,200 Speaker 1: us more is on En trinivasan On a is an 33 00:01:59,200 --> 00:02:02,240 Speaker 1: expert when it comes to the semiconductor and hardware business. 34 00:02:02,240 --> 00:02:05,880 Speaker 1: He's an analyst for Bloomberg Intelligence and Heat joins me 35 00:02:05,960 --> 00:02:10,519 Speaker 1: now on tell us about HPS results and also their 36 00:02:10,600 --> 00:02:14,799 Speaker 1: future guidance. The future guidance is the number one driver 37 00:02:15,120 --> 00:02:20,320 Speaker 1: of why perhaps the stock is down and it's printing. 38 00:02:20,639 --> 00:02:24,520 Speaker 1: The printing business of HPING continues to be very, very weak. 39 00:02:24,560 --> 00:02:26,919 Speaker 1: If you look at Q three numbers, it was down 40 00:02:26,960 --> 00:02:30,360 Speaker 1: fourteen percent year on year, even with currency it was 41 00:02:30,400 --> 00:02:34,120 Speaker 1: down ten percent. UM. It's got a very strong operating 42 00:02:34,160 --> 00:02:36,400 Speaker 1: margin relative of the PC business. But if you look 43 00:02:36,440 --> 00:02:38,920 Speaker 1: at the hardware side of the printers, I was down 44 00:02:38,919 --> 00:02:42,960 Speaker 1: ten percent, commercial side was down, consumer sides were down, 45 00:02:43,080 --> 00:02:47,920 Speaker 1: supplies were down, and and we're not seeing a substantial 46 00:02:47,960 --> 00:02:52,040 Speaker 1: improvement in that side of the house. So Personal Systems 47 00:02:52,320 --> 00:02:54,959 Speaker 1: was okay, I mean it was flat here on her 48 00:02:55,760 --> 00:03:01,400 Speaker 1: up in constant currency, um and um. You're starting to 49 00:03:01,440 --> 00:03:06,160 Speaker 1: see some potential stabilization there, but printing continues to be 50 00:03:06,200 --> 00:03:10,400 Speaker 1: a drag on the business. And fourth quarter guidance is weak, 51 00:03:10,480 --> 00:03:13,359 Speaker 1: and they're doing some restructuring and continued restructuring, my dad, 52 00:03:14,000 --> 00:03:17,320 Speaker 1: but you want to see some potential light at the 53 00:03:17,400 --> 00:03:19,880 Speaker 1: end of the chunnel, this quarter was not it. Well, 54 00:03:19,960 --> 00:03:24,480 Speaker 1: you're you're right about the continuing cost cuts because according 55 00:03:24,520 --> 00:03:29,919 Speaker 1: to the company's chief executive Dion Weisler Uh, they expect 56 00:03:29,960 --> 00:03:34,760 Speaker 1: to reduce costs by over a billion dollars. I mean, 57 00:03:34,800 --> 00:03:39,200 Speaker 1: cost gusts do not revenue. You can't make your revenue expand. 58 00:03:39,320 --> 00:03:41,480 Speaker 1: And in one of the things that we want to 59 00:03:41,520 --> 00:03:44,880 Speaker 1: see is yes, the operating margin improvement of the castle 60 00:03:44,920 --> 00:03:49,480 Speaker 1: improvements are are good, particularly their structural cost reductions, and 61 00:03:49,600 --> 00:03:52,360 Speaker 1: those are those are great things. But one of the 62 00:03:52,440 --> 00:03:55,960 Speaker 1: things that we do want to see from the analyst 63 00:03:56,000 --> 00:04:00,440 Speaker 1: community is the slowdown in the rate of decline of 64 00:04:00,520 --> 00:04:06,920 Speaker 1: both PCs and printing and potential for improvement. And and 65 00:04:07,280 --> 00:04:09,760 Speaker 1: we don't see that in the current quarter or the guidance. 66 00:04:10,320 --> 00:04:13,120 Speaker 1: When the chief executive says that they are trying to 67 00:04:13,160 --> 00:04:17,200 Speaker 1: invest in higher end products in order to increase their profitability, 68 00:04:17,720 --> 00:04:20,960 Speaker 1: what kind of higher end products are they talking about. 69 00:04:21,320 --> 00:04:25,920 Speaker 1: So in the PC segments that could involve m gaming 70 00:04:26,000 --> 00:04:30,240 Speaker 1: PCs or two in one laptops, laptops and tablets that 71 00:04:30,279 --> 00:04:34,480 Speaker 1: are detachables for example UM and in the printing business 72 00:04:34,600 --> 00:04:38,320 Speaker 1: it is more um A three printers the equivalent of 73 00:04:38,360 --> 00:04:41,239 Speaker 1: the office printers that you have relatively one per floor 74 00:04:41,360 --> 00:04:43,360 Speaker 1: if you made the big ones that are typically made 75 00:04:43,360 --> 00:04:46,599 Speaker 1: by Cannon and xerox UM. And the reason why those 76 00:04:46,640 --> 00:04:51,920 Speaker 1: are UH an attractive market is because they are high priced, 77 00:04:52,240 --> 00:04:56,479 Speaker 1: their high margin, and the supply UM agreement that you 78 00:04:56,560 --> 00:04:59,680 Speaker 1: have for those printers is also very attractive. So for 79 00:04:59,760 --> 00:05:03,480 Speaker 1: all those reasons, those segments are attractive, but I mean 80 00:05:03,520 --> 00:05:07,760 Speaker 1: they're there. These are relatively small segments, and there would 81 00:05:07,960 --> 00:05:11,320 Speaker 1: entrenched competition in place or entrenched leaders in place. So 82 00:05:12,120 --> 00:05:15,240 Speaker 1: uh HP has got a little ways to go in 83 00:05:15,360 --> 00:05:20,240 Speaker 1: order to move its own revenue leadle from those segments. Well, indeed, 84 00:05:20,600 --> 00:05:23,640 Speaker 1: just taking a look at the printer net revenue, as 85 00:05:23,680 --> 00:05:28,120 Speaker 1: you said earlier, down four personal systems UH net revenue, 86 00:05:28,160 --> 00:05:32,599 Speaker 1: there was flat commercial net revenue down three percent, but 87 00:05:32,760 --> 00:05:37,279 Speaker 1: the consumer business the revenue was up eight percent. What 88 00:05:37,480 --> 00:05:41,960 Speaker 1: is HP doing in order to move that particular metric higher. 89 00:05:42,320 --> 00:05:45,200 Speaker 1: So one of the things that we've seen last quarter 90 00:05:45,400 --> 00:05:48,840 Speaker 1: from the market research from you did see um um 91 00:05:49,640 --> 00:05:53,080 Speaker 1: us PCs grow for the first time in several years. 92 00:05:53,680 --> 00:05:57,880 Speaker 1: So HP is very strong in UM in the market UM. 93 00:05:58,160 --> 00:06:02,880 Speaker 1: So that definitely eight This particular seven second is HB 94 00:06:03,000 --> 00:06:08,119 Speaker 1: has said that it's walking away from less profitable PC 95 00:06:08,360 --> 00:06:11,719 Speaker 1: areas where it's not trying to maintain share for the 96 00:06:11,760 --> 00:06:16,039 Speaker 1: sake of it and it wants profitable share UM and 97 00:06:16,160 --> 00:06:20,880 Speaker 1: to that those two factors put together, UM likely impacted 98 00:06:20,920 --> 00:06:24,760 Speaker 1: that eight percent consumer growth on a year on year basis, 99 00:06:25,040 --> 00:06:29,679 Speaker 1: and even the commercial net revenue decreased. That's a reasonable number. 100 00:06:29,720 --> 00:06:33,159 Speaker 1: One PCs are actually defining substantially more than that forward 101 00:06:33,240 --> 00:06:36,480 Speaker 1: to seven percent, if you go back one to three quarters. 102 00:06:37,120 --> 00:06:38,920 Speaker 1: And then when it comes to the stock market, it's 103 00:06:38,960 --> 00:06:43,159 Speaker 1: all about how much something could be worth. And currently 104 00:06:43,240 --> 00:06:47,160 Speaker 1: the market cap of HP is twenty four and a 105 00:06:47,240 --> 00:06:51,239 Speaker 1: half billion dollars, but the company has more than five 106 00:06:51,279 --> 00:06:54,960 Speaker 1: and a half billion dollars in gross cash Is that 107 00:06:55,040 --> 00:06:59,160 Speaker 1: attractive to investors? It is, and in the cash flow profile, 108 00:06:59,200 --> 00:07:03,039 Speaker 1: particularly with the cost cuts um are all attractive. But 109 00:07:03,120 --> 00:07:04,880 Speaker 1: at the end of the day, if you look at 110 00:07:05,200 --> 00:07:09,040 Speaker 1: the the technology media telecom space is filled with a 111 00:07:09,040 --> 00:07:11,760 Speaker 1: lot of these companies that are legacy A companies. You 112 00:07:11,800 --> 00:07:14,640 Speaker 1: have a bank, you have c s C. You have 113 00:07:15,320 --> 00:07:18,920 Speaker 1: a lot of these sorts of companies that are slow growth, 114 00:07:19,120 --> 00:07:23,400 Speaker 1: relatively profitable, and they're in permanent restructuring more from a 115 00:07:23,440 --> 00:07:27,720 Speaker 1: cost containment perspective. But you know, after a little while, 116 00:07:28,440 --> 00:07:32,480 Speaker 1: people gravitator tech for sales and earning growth and you 117 00:07:32,480 --> 00:07:35,840 Speaker 1: have to demonstrate continuity there on trini us. And thank 118 00:07:35,840 --> 00:07:40,360 Speaker 1: you very much, senior semiconductor hardware analyst for Bloomberg Intelligence. 119 00:07:40,640 --> 00:07:43,360 Speaker 1: Thanks for listening to Taking Stock. I'm pim Fox. This 120 00:07:43,520 --> 00:07:49,440 Speaker 1: is Bloomberg coming up Bloomberg Law is going to be 121 00:07:49,520 --> 00:07:55,080 Speaker 1: talking about the unionization of graduate students. A National Labor 122 00:07:55,200 --> 00:07:59,680 Speaker 1: Relations Board decision means graduate students who teach can unionize.