HP’s Financial Results Showcase Market Problems

Considering global economic conditions, HP’s financial results could have been a lot worse. Commercial sales of personal systems held flat, indicating that companies are still buying hardware while consumer sales dropped sharply. This is no surprise given the increase in both inflation and interest rates that are damaging a number of markets now. Printing is still displaying a slow decline, giving HP plenty of time to recover. Wisely, HP has significantly increased its liquidity, which should help if it wants to acquire another company or invest in technologies that will improve its prospects. 

Let’s talk about the market problems HP’s financials showcase, then contrast HP with NVIDIA which appears to be weathering this storm far better than any of the other technology companies.   

Market problems

As we approach the fourth calendar quarter, market problems don’t seem to be mitigating as much as many hoped. Interest rates are at historical highs and are expected to rise as inflation, while reduced, still has not hit an acceptable rate in most countries, including the U.S. Supply problems, while reduced, are significant, and the risks that the supply chain for processors will be severely impacted remain high and tied to China’s threat of attacking Taiwan. 

Sustainability efforts are successfully resulting in lower consumption of renewable resources which continues to adversely impact markets like printing that live on the consumption of renewable resources. While slowed, the effort to go paperless and massively increase equipment reuse and recycling is having an adverse impact on sales, even though these trends are clearly better for the environment. 

So why is NVIDIA doing so well?

NVIDIA caught and owned the AI and metaverse waves

The same problems that are hitting everyone else in the segment also hit NVIDIA, but over a period of two decades, NVIDIA nearly cornered the market on AI, a technology that has recently taken off. 

While traditional markets are in decline, AI interest has gone vertical, and NVIDIA has become practically synonymous with AI. But NVIDIA doesn’t just dominate in AI. It also dominates in the metaverse.

While Facebook did a face plant with its consumer metaverse effort, NVIDIA’s Omniverse has become close to a world standard for construction simulation and digital twins. These are considered to be the future of all construction, particularly construction that will implement advanced concepts like AI-driven robotics. 

In short, with substantial forethought, pre-planning, and impressive execution, NVIDIA was able to break free from its traditional markets that had declined and pivoted to new markets which are exciting and able to overcome the drag created by external market conditions that are hurting most everyone else. 

HP’s potential break-free products

Where HP has a similar opportunity to the AI and metaverse efforts that have catapulted NVIDIA into the limelight this year is in 3D printing. Unfortunately, HP is not yet investing in it to the level that would assure success. HP is only in the commercial market with a technology that will not scale down to small business, maker, or consumer use. 

As we approach a world of 3D printing, the goal would be to allow people to have these printers in their homes, schools, and small businesses much like they have paper printers and once had FAX machines in the past. 

But HP cannot seem to scale down which means its 3D technology, rather than dominating like NVIDIA’s does, is almost invisible instead of giving HP the pop that NVIDIA is getting from AI and Omniverse. 

But if HP can figure out a way to scale its technology both up and down, this could change. So in a way, NVIDIA has highlighted a path for HP to take that will increase HP’s status and financial performance.

Wrapping up:

HP did well in a very difficult quarter, but it needs a breakout technology like NVIDIA’s that will allow it to move beyond the performance of its legacy products. In 3D printing, HP has that technology, but it’s a technology that doesn’t scale. Until HP can get a scalable 3D printing technology or find another breakout technology, HP, like most of its peers (perhaps except Apple which uses a different sales and customer care model) won’t be able to rise to its full potential.  

Sometimes you must step out of your comfort zone to step up in the market. HP has a good team and great products. It just needs to push like NVIDIA did to create a better tomorrow for both the company and its customers.