Sometimes the good guys really do win. Last night, the good guys at HP Inc (HPQ) won, and I couldn't be more thrilled.
If you don't know this particular iteration of the old Hewlett-Packard empire, it's the most prosaic -- the personal computer and printer division. I could have called it iconic, but that's become a curse word of late when it comes to tech, as iconic means Gone With the Wind.
I have to admit, when I first heard the redoubtable Meg Whitman talk about splitting off this division from the company that had moved so far deeper into more modern tech, so to speak, I figured it was pretty doomed.
Who would give a damn, to keep the Rhett Butler analogy going, about a company that made the most simplistic hammer and nails -- I won't even dignify it with the razor/razor blade model -- portion of tech?
Plus, when the spin occurred, you had a market that seemed to be in perma-double digit decline, with feckless competitors from overseas trying to undercut each other and inventories brimming from Staples (SPLS) to Costco (COST) to Best Buy (BBY) , pretty much ear-to-ear.
But last night, this company reported not only stabilization but excellent growth; that's right, 7% growth, with "strong" momentum -- their word, not mine but they are right -- and personal systems, that is old fashioned PCs, grew 10%, with robust sales in every region. It wasn't just a rising tide; the company's reclaimed the number one crown, with 21.7% share, and it beat the overall year-over- year growth of the industry by an astounding 12% .
It gets better. The printing business, after six straight years of inexorable decline, actually grew 2% and hardware sales increased 4%.
It's not hyperbole when CEO Dion Weisler says "we're excited to be igniting a real renaissance in printing", which is being led by the Sprocket which, Weisler points out, is hot among millennials "that have had their photos trapped in their phone" and, "are now able to free them by having a sprocket in their pocket."
I immediately went to Amazon (AMZN) to see what the deal was, and they are selling fast -- only two left -- for $129. It's real.
How did the company do this? First, it is going after underpenetrated portions of what we forget is a $333 billion market, and they are doing so with innovation and security. Second, it is managing inventories closely, something that the always-fabulous CFO Cathie Lesjak has been doing since time immemorial. Third, it is riding a wave of steady improvement and a refer refresh recycle, although I have to tell you I feel confident that this isn't a one-off comeback.
I think Weisler's right when he says: "I'm very confident in our team's ability to out-execute the market and out-execute our competitors. "
With PCs, printers and supplies all going in the right direction, the company is producing bountiful cash flow and returning most of it to shareholders -- another Lesjak hallmark. That, too, could stand to grow as the innards, the components, begin to come down as so many of the component makers are adding plants to meet this intense demand.
Finally, I want to add that when this split-off occurred I figured, like many, we have this wasting asset that paid a good dividend with a hope that 3-D printing would save its carcass somewhere down the road.
Wrong. It saved itself.
And I think, despite their determination to tamp expectations that the analysts so badly wanted to lift, it could be good for an even bigger run than the 28% share price increase given the momentum and the discipline.
Oh, and maybe one day 3-D printing will come into conventional play. When it does, I am confident this company will be among the winners, if not the winner outright.
