Question

Check online for HP's financial statements. What can you tell us about their performance trend? Use evidence from the financial statements to discuss how you came to this conclusion. Why do you think the company performed this way compared to previous period? Do you have any recommendation for this company?

Answer 1

Hewlett-Packard Company offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Its operations are organized into seven segments: Services, Enterprise Storage and Servers (ESS), HP Software, the Personal Systems Group (PSG), the Imaging and Printing Group (IPG), HP Financial Services (HPFS), and Corporate Investments.

The Hewlett-Packard Company (commonly referred to as HP) was an American multinational information technology company headquartered in Palo Alto, California. It developed and provided a wide variety of hardware components as well as software and related services to consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. The company was founded in a one-car garage in Palo Alto by William "Bill" Redington Hewlett and David "Dave" Packard, and initially produced a line of electronic test equipment. HP was the world's leading PC manufacturer from 2007 to Q2 2013, after which Lenovo came to rank ahead of HP. Hewlett-Packard split the PC and printers business from its enterprise products and services business on November 1, 2015, resulting in two publicly traded companies: HP Inc. and Hewlett Packard Enterprise.

If we talk about their Financial Performance, we can clearly see basis these data that company Book is not looking in good condition. Company Total Assets is falling down however FY2017 was slightly better than FY 16. While Cash and short term Investment 8.15 B while Liability is somewhere 36.32 Billion.

              Considering the balance sheet of FY 17

Current Ratio 1.00  

Quick Ratio 0.74  

Cash Ratio 0.36  

Now considering the Profit & Loss Account book, Company net income growth is falling with -5.25% while Total sales is 52.21 billion while working capital is down with -0.06% . Overall by seeing these data it is very clear that company has faced drastic decline in sales & revenue which causes the decline in Assets as well. HPE has been cutting costs and investing in research to bolster its mainstay server business amid competition from cheaper, non-branded assembled servers even as IT spending shows signs of improvement.

While HPE was careful not to set too high of a growth bar for the remainder of the year, we see this as a multi-quarter and potentially multi-year trend that puts upward pressure on estimates. At the time, it was argued that the split would allow HP to focus and update its product portfolio to win PC market share. Also, HP would spend most of its cash flow paying dividends and buying back shares, a classic corporate strategy for a business in a mature and declining market. While shares of HP have underperformed HPE post-split, both are still vastly outperforming the greater market -- HP Inc. has more than doubled the S&P 500's 32% return. HP Inc. continues to execute in a tough environment: IT-focused analysis firm Gartner found shipments in the PC market decreased 2.8% in 2017, the sixth consecutive year of declines. However, HP was able to post 4.6% year-over-year growth, growing its market-share lead from 19.5% to 21%. Driven by several robust quarters of revenue growth, HP Inc. (HPQ) ended fiscal 2017 with free cash flow of $3.3 billion. The firm returned 69.0% of free cash flow ($2.3 billion) to shareholders via share repurchases and dividends in fiscal 2017.

After split of company there was certain expectation however it didn't work however my recommendation for the company will be that company has to focus on more on R&D and try to develop latest technology and target developing market with wide range of products. HP printer played a crucial role in changing mind of user to purchase printer for household which helped them to generate more revenue. They need to also work on this to take this to developing nation and try to capture untapped market. Also company should focus to expand their product line and offer something out of other for each customer segment or group.