‘Tough’ PC market hits HP revenues, Windows 10 hasn’t helped

According to the newest quarterly earnings report from HP, Windows 10 hasn’t been as much of a selling point as some people had hoped. The company posted its quarterly earnings a few days ago, and saw a fairly significant drop in earnings as compared to their revenues during in a similar time period last year.

In exact numbers, the first quarter of fiscal 2015 had HP bringing in $13.86 billion and shares of the company’s stock going for 41 cents per share. In FY16 Q1, the company brought in just $12.25 billion, with the company’s stock dropping to as low as 35 cents.

The apparent failure of Windows 10 to promote new computer sales might just be because of the nature of Microsoft’s generous plan to get people onto their new operating system. During the release of Windows 7 and 8, it was a relatively viable option to go out and purchase a new computer with your upgrade to a new operating system.

Simply put, you had to pay a relatively hefty sum to get the operating system, so why not go all-in and get a brand new computer to replace the clunker you were running the obsolete software on? With Windows 10, of course, the upgrade has been free–the average customer has so had no reason to feel like they were making a truly significant financial investment into Microsoft’s shiny new future of computing.

Whether or not Microsoft’s strategy had anything to do with the drop in HP’s numbers, the company doesn’t feel terribly concerned, and assures their partners that they’ve got things under control.  According to Dion Weisler, President and CEO of HP:

We have a clear strategy that leverages our strengths, and we are focused on execution, taking cost out of the business and delivering innovations that will amaze our customers and partners. Although we have some tough quarters ahead, I am confident in the future.

Indeed, this is nothing new. HP has stated in the past that Windows 10 might not make an immediate impact on their PC sales:

We do anticipate a challenging operating system transition to Windows 10 on two dimensions — one was a free upgrade and the the very short transition time, which is normally like three months, which was compressed to under one month.

What that drove was fairly high Windows 8 channel inventory levels. That will take a little time to flush. The good news is that the Windows 10 feedback is pretty good and a great operating system is important for the ecosystem and in the industry. So once Windows 8 flushes, which may take a little time in the industry. We should see some simulation from Windows 10.

HP is currently in the process of splitting the PC and printer business off from the enterprise business, something that Weisler is said to be “accelerating.” We’re looking forward to seeing the new PC business’s performance, particularly as Windows 10 continues to ramp up in audience and hopefully starts convincing those Windows 7 stragglers to finally make the switch.

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