Photographer: Akio Kon/Bloomberg

HP Shares Fall as Doubt Mounts Over Ability to Keep Growing

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  • Analysts predict stagnant sales in core PC, printer business
  • HP spun out faster growth, more profitable businesses in 2015

HP Inc. shares tumbled the most in a year, signaling skepticism that the world’s biggest maker of personal computers can sustain the robust growth rate of the past year.

The Palo Alto, California-based company reported Tuesday that sales rose for the fifth consecutive quarter. But there is lingering investor doubt about the growth potential of its core PC and printer businesses -- analysts are predicting stagnant sales in 2018 and 2019. Revenue climbed 11 percent in the three months through October.

It will be hard to maintain that level of growth over the coming quarters, Chief Financial Officer Catherine Lesjak told analysts. “The compares are tougher, we know that,” she said.

The shares fell 5 percent to $21.34 at the close Wednesday in New York, the biggest single-day decline since Nov. 23, 2016.

The company formerly known as Hewlett-Packard Co. spun out its data center, software and services as Hewlett Packard Enterprise in 2015, with the expectation that shareholders would benefit from those faster-growing, more lucrative businesses. Yet shares in HP Inc., which focuses on PCs and printers, have outperformed its more glamorous offspring, rising about 71 percent to Hewlett Packard Enterprise’s 47 percent, by embracing higher-end products and producing revenue increases.

But Chief Executive Officer Dion Weisler is facing the prospect of lower profitability at the printer division, following the $1 billion acquisition of Samsung Electronics Co.’s printer arm earlier this month.

The former Samsung unit generates a lower proportion of revenue from the more lucrative supply of printer cartridges than HP currently does, making it harder to reach the print division’s profitability target of between 16 percent and 18 percent of revenue. The acquisition is unlikely to contribute to profit growth until the second half of the 2018 fiscal year, which started Nov. 1.

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