HPQ
#Thanks, <UNK>.
So let me say that, everything we've spoken about so far has really been focused on the core, and we're really incredibly focused on our traditional franchises of print and personal systems.
But as part of our overall strategy for the Company, we do have certain growth areas that are incredibly important to us.
You mentioned a couple of them.
Our A3 product work remains on track, and our portfolio will come out towards the middle of next year.
That is on time and on track, and we're doing a lot of work around preparing, not only for the products, but for the go-to-market that is required in order to be successful in this marketplace.
Another part of our growth engine is graphics.
Graphics grew for the 11th consecutive quarter, and we're just about to walk into drupa next week, which is the Olympics of the graphics business.
It happens every four years, and we're very excited about some of the products that we will be announcing at drupa.
And the third area is commercial mobility.
And our commercial mobility practice continues to grow.
We're excited by the work we're doing there.
We have made some really interesting category-creating product announcements, with the Elite x3 during the course of the quarter at Mobile World Congress to rave reviews.
So lots of positive signals in the market from a product perspective, and the pipeline that we are building.
And then, of course, only last week, we announced our 3D printing products.
And we have really breakthrough innovation here, solving problems of speed, quality, and cost.
We said, we would release them in the second half of this year, and a proof point of that is the announcements that we made last week.
And the strategic announcements that we've made with Nike, with BMW, with Johnson & Johnson, and [JBL], a very important player in this space.
I think there is a lot of markers out there, that point to the execution of this team.
We do what we say we are going to do, whether it's product, whether it's go to market, or business model readiness.
Well, thank you, <UNK>, and thank you for the congratulations.
And first, let me extend my congratulations to Megan and the Hewlett-Packard Enterprise team on a spectacular earnings, and on a very successful announcement of the spin merger they're doing with CSC.
I think what that demonstrates is that, the separation and the focus of the organizations on the markets that are moving at top speed is really working.
It's produced better results for Hewlett-Packard Enterprise, it's producing solid results for us, as well as fueling the innovation engines of both companies.
So I don't want to comment much further on Hewlett-Packard Enterprise's announcement, but I will say that we are really committed to the long-term success of HP.
I'm very happy with the assets that we have, in both printing and personal systems.
They are both an important, and play a very important role within our portfolio, as sort broad things.
We obviously, always continue to look, and re-evaluate the markets as they change, and measure all of our assets relative to the strategy.
And sometimes that results in a divestiture, and we made a divestiture this quarter in some marketing optimization assets, that's an ongoing process.
But as far as our major franchises go, we're very committed to both portfolios.
(Inaudible ---+ low volume) down 50 basis points as you mentioned.
And that's really driven by currency and the very competitive pricing environment we saw.
It was partially offset by the productivity initiatives that we've got, and the broader non-revenue-generating cost reductions, as well as the favorable hardware mix.
And then, we had some benefit from the divestiture gains.
It wasn't litigation, it was divestiture of the marketing optimization assets.
But as I told you, we made the conscious decision to invest that gain back into placing incremental NPV positive units.
And you can see the impact of that, frankly, in the share gains that we had quarter on quarter, as well as basically bringing our channel inventory levels for supplies in a bit more.
From a quarter-on-quarter perspective, the increase was really driven by cost improvements, as well as to the divestiture gain, and that was partially offset by competitive pricing, currency, and some investments that we made in go to market and R&D.
Thanks, <UNK>.
I am super excited by it.
I think the feedback from potential channel partners, from end customers, and from analysts, and those that follow the industry closely, understand what a breathtaking breakthrough we've made towards, really pulling 3D printing into the mainstream.
We released the first production, short run production 3D printing systems.
They're 10 times faster than other products that are out on the marketplace, unbelievable quality, and most importantly, at half the cost.
And when you get those three things right, you start to tap into specific applications that are better to be done by digital 3D printing, than they are in analog fashion.
And the best example I can give you, is our 3D printers themselves, 50% of the bill of materials of our 3D printers are printed by our 3D printers.
So our printers are printing themselves.
And it's a perfect example in short run manufacturing, of the great business case.
We're not doing this to make a point.
We're doing this, because it's more economically advantageous to us, to print these products in 3D, than it is to use traditional manufacturing.
So we're very bullish.
We have a long and complex, and a like complexity here road map.
This is not easy to duplicate.
We're leveraging more than 5,000 patents from our core, leveraging 30 years of innovation that we've had in our printing business.
And we're bringing it to bear into a market that really hasn't had a very large mainstream player, with the brand that HP has, and a reputation that we have.
So we're really excited by the market.
We're happy with the ramp we're doing on our partners, and our certified channel partners.
We're incredibly excited by the really impressive ecosystem co-innovators with us, Nike, BMW, Johnson &, Siemens, [JBL], the list goes on, both in materials, as well as in customers.
Yes, look, we're not surprised by the PC market.
I think we were one of the earlier to predict that these markets would continue to be challenged for quite some time.
And as a result of that, we needed to take immediate action to get our costs in line with where the markets were.
But over the long-term, we sort of generally broadly agree with the analysts, and where they expect things to land.
We see continued declines in calendar quarter two.
The market's projecting that it will improve in calendar quarter three and four, and we tend to disagree.
Now whether it's low single-digits or mid single-digits, I guess, that's up for debate, and no one is perfect at making those predictions.
But I think things are getting better.
To your second point on some of these new categories, I think that as the technology improves, as we are able to fit more power into smaller platforms, we get to have this continuous evolution of the continuum, all the way from mobile up to workstations.
And these lines are beginning to blur, and that enables us to create new products and new categories like Elite x3.
That technology is not going to slow down.
It's only going to accelerate.
So I think we've got to start looking as an industry, at the entire spectrum, all the way from phones to workstations.
Think about that market, think about how those hard lines were characterized in the past, and how those hard lines will begin to break down in the future.
And as leaders, it's incumbent on us, to reinvent what the category is capable of.
Whether that be the success, we're having with our x2 or the new category-creating products like x3.
It's all about changing that continuum.
So we continue to have a very highly disciplined approach to this business.
We segment, we segment again, we navigate the heat in the market, and we predict where we think that heat is going to be.
We're constantly challenging ourselves on price, function, value for our customers.
We're always taking costs out of the system, and we have to be a massive innovator.
And I think we're doing all of that as well.
Thanks, <UNK>.
On the supplies, I think the right way to think about it is, a 16% decline in supplies revenue.
The fact that there was 6 points of currency.
So you're down to ---+ down 10% constant currency, but you've got 7 points of channel inventory correction that our belief is, you don't continue to correct channel inventory on a go forward basis.
So really, when you are looking at, what I guess, we sometimes refer to as real supplies growth or decline, right about minus 3.
And we obviously, as we go through 2017, we would expect that will continue to improve, so it stabilizes by the end of 2017.
But again, largely in line with what we expected.
And then, from a free cash flow perspective, a couple of things.
First off, where we saw particularly strong performance was in the cash conversion cycle.
If you look back to Q1, our cash conversion cycle was minus 15 days, and we are now at minus 24.
And we basically hit on every one of those metrics.
<UNK> mentioned it, was a company-wide initiative, in which we educated, and helped people become even more conscious about cash flow.
We enlisted the help of our sales reps in getting collections done.
It was an incredible team effort.
And something, in many ways we've instituted now, kind of permanent changes, and permanent initiatives around that free cash flow, and the cash conversion cycle.
I also just really briefly want to mention the fact that it, our free cash flow on a year-to-date basis also includes about $170 million of separation cash outflows, which obviously are more one-time in nature.
Thank you all for joining us today.
I hope you will agree, we delivered really solid results here, and we did exactly what we said we would do, and that's important to us as a leadership team.
We do know how to execute, regardless of market conditions, where we don't stick our heads in the sands here.
We understand what is going on in the market, and how to adjust our organization accordingly.
We're delivering on our financial commitments.
We've made solid progress, more work to do.
We're executing across core, growth and the future, and lots of proof points there.
We're shifting to higher margin and growth product segments, and we're setting this Company up for long-term success.
So thank you very much.
