HP Inc.

Although we view HP's strong global market position--as evidenced by leading market shares in both print and PC markets--favorably, its pivot in extensive printing-segment business strategies potentially increases operational risk, and that will likely contribute to revenue and unit market share losses in the near term. The company is also likely to experience additional margin pressures from a declining supplies revenue base, partially offsetting in-progress cost-reduction plans. This trend is critical because HP derives about two-thirds of profits from the printing segment, mainly because of higher-margin printer ink and toner sales. Although the printing segment will be pressured as HP implements new hardware and pricing strategies, we expect the company to manage the business challenges and perform broadly within our

...Near-term business challenges add uncertainty, and we expect revenues and profits to decline steadily in fiscal years 2020 and 2021. We expect HP Inc. to face headwinds in its more profitable printing segment partly because of increasing competition in aftermarket and alternative printing supplies, which are now coupled with remote working trends for much of its client base. Although the company has seen some demand from consumer home printing as weak commercial print demand persists (down 37%), supplies revenues were down 18% year over year in the third quarter ended July 31, 2020. We expect overall printer demand to be weak in 2020 (about -12%) and growth to be constrained because of global uncertainties and disruptions related to the COVID-19 pandemic. Although we view HP's strong global market position--as evidenced by leading market shares in both print and PC markets--favorably, its pivot in extensive printing-segment business strategies potentially increases operational risk, and...

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