HP chief throws about AI fairy dust in hopes of reviving slumbering PC giant

What is double of 15% sales shrinkage?

HP CEO Enrique Lores is betting a sprinkle of AI dust can regenerate the flagging PC market – and with shipments still in decline across the industry, he can't afford to tease Wall Street.

The world's second largest seller of desktop computing hardware has reported a 15 percent year-on-year decline in revenue to $53.7 billion for fiscal 2023 ended 31 October. Profit before tax was $2.93 billion versus $4.32 billion in the prior year.

"We finished the year in a much stronger position than we began," said Lores on a conference call. "We knew from the start that it could be a tough year. The challenging external environment constrained demand across the industry, and this is reflected in our full-year results."

Orders picked up in recent months. Analyst data indicates the rate of decline is slowing after resellers began clearing inventory they'd amassed in the latter stage of the pandemic, when the frenzied buying patterns seen in prior years vanished.

For Q4, HP reported revenue of $13.8 billion, down 6.5 percent year-on-year. Personal Systems was down 8 percent to $9.4 billion and Printing was down 3 percent to $4.4 billion.

Profit before tax was $852 million, better than the $647 million brought in a year earlier, helped by a reduction in structural costs.

HP expects business PC refresh cycles to kick in next year, with more corporate customers shifting their estate to Windows 11 – yet it is the advent of the AI PC that Lores thinks signal better times.

"We also continue to build momentum in AI. We are the first company to offer dedicated workstation solutions with Nvidia's AI Enterprise software. And more broadly, we're advancing our work to create the AI PC category," he said.

"We have built the widest range of client product based on Intel's next-generation of processors, Intel Core Ultra, giving us a strong foundation on which to build, but we co-engineer and commercialize new AI architectures next year."

Lores and Lenovo senior veep Luca Rossi trilled about the prospects for AI PCs at the Canalys Channels Forum last month, though neither was able or, more likely, willing to articulate what those machines will offer over and above classic PCs.

"You will see systems that are able to process data at 40 trillion operations per second and even more," said Rossi. "And then combined with certain software upgrades, the experience will jump really to the next level, and I believe we are confident this will deliver productivity and also spark a significant replacement cycle in the PC."

Lenovo is aiming to release its first AI PC in the second half of next year or early in 2025.

Lores claimed at the same event that AI is going to "bring a lot of energy back to the category" and also "drive renewal devices that will be more expensive."

On yesterday's conference call, HP's CEO added: "The emergence of the AI PC in 2024 will start a new cycle of market expansion and refresh… we believe this can double the overall PC category growth rate over the next three years."

Given that PC sales volumes shrank last year and will this, perhaps those growth projections from HP don't look that ambitious after all. We've asked analysts for their thoughts, and will update should any say much of note. ®

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