HP relies on ongoing pandemic changes

HP’s deal to buy Poly is the largest it’s made since the Hewlett-Packard conglomerate broke up in 2015.


Photo:

David Paul Morris / Bloomberg News

Zoom can’t afford zoom fatigue. And now HP can’t either inc

HPQ -3.25%

The PC and printer maker is buying video conferencing equipment maker Poly for around $1.7 billion in cash. The deal, which carries a price tag of around $3.3 billion including Poly’s net debt, is the biggest move HP has made since the Hewlett-Packard conglomerate spun off in 2015 from The Old Hewlett-Packard bet a larger amount on a hardware-centric business when it completed its $23 billion acquisition of PC maker Compaq in 2002.

In this light, buying poly for a relative fraction hardly seems like an exaggeration. And HP has long announced its intentions to expand its commitment to other types of technology devices used by businesses and consumers. Chief Executive Officer Enrique Lores told analysts at a meeting in October that “M&A will be an important part of our strategy,” with a particular focus on the computer peripherals market, which can include everything from webcams to mouse devices to headsets. The company also reiterated on Monday its plan to buy back at least $4 billion of its own stock this year.

Still, shares of HP fell about 3% on the news in morning trade. Poly, formed from the 2018 merger of Polycom and Plantronics, hasn’t been able to fully capitalize on the same work-from-home trend that has fueled other hardware manufacturers. Adjusted sales increased less than 1% for the fiscal year ended March 2021 and are expected to decline more than 3% to just under $1.7 billion in the current fiscal year. The company has blamed supply chain constraints for its woes, saying in its latest quarterly investor call last month that it now has an order backlog worth “hundreds of millions of dollars.”

HP is banking on it being able to unclog that and then some. Mr. Lores said Monday that HP’s supply chain booklet will accelerate Poly’s growth, so much so that HP is targeting 15% annual sales growth for the next three years. Wall Street only forecast a 5% pace for fiscal 2023-24, with no consensus estimates available for Poly’s fiscal 2025.

That will depend heavily on the pandemic-driven shift toward hybrid workspaces, which will persist for the long term, prompting employers to invest in high-quality video conferencing capabilities both at home and in the office. However, such a result is hardly assured; A recent survey of tech-savvy Bay Area businesses conducted by Robert Half found that 71% of employers would like their employees to return to the office full-time. But a separate survey of more than 1,000 professionals from the same company also found that half said they would quit their job if demanded.

HP is effectively betting on workers to have the upper hand.

What is endemic and how will we know when Covid-19 will become endemic? WSJ’s Daniela Hernandez explains how public health experts assess when a virus like Covid-19 enters an endemic stage. Photo: Michael Nagle/Zuma Press

write to Dan Gallagher at dan.gallagher@wsj.com

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