Toni Sacconaghi welcomes HP Inc.'s President and CEO, Enrique Lores, to the meeting and reminds attendees to use Pigeonhole technology to submit questions. Lores arrived at the hotel at 2:30 am after reporting earnings in California the previous day. Lores gives a recap of HP's solid fiscal Q2, highlighting growth in operating profit and earnings per share. The PC business saw a recovery in demand, particularly in commercial PCs. The Print business performed as expected, and free cash flow was in line with projections. Lores also mentions the introduction of new AI-driven innovations in the PC space and other areas of the company.

Enrique Lores, CEO of HP, explains that while normal seasonal growth for commercial PCs is down about 7%, HP's growth was only down 4%. He also discusses their confidence in the second half of the year, citing stronger seasonality in the consumer space and a larger funnel of deals in the enterprise space. He also mentions the impact of Microsoft's announcement of Windows 11 and the release of budgets for federal businesses in the US. Overall, Lores is confident in continued momentum for HP's PC business.

HP expects an increase in deals in the federal space in the second half of the year, which will also benefit the commercial space. They have seen performance improvements and other qualitative drivers that will sustain demand. HP reaffirmed their free cash flow guidance and narrowed their EPS range, but did not change their EPS guidance due to operating under multiple scenarios. China is a significant market for HP, but they attribute weakness in that market to market-driven factors rather than HP-specific issues.

The demand for products in China is declining due to economic concerns, such as problems with real estate and unemployment. Despite this, the company has not changed its restrictions on sales in the country. The CEO also mentions their plan to return 100% of free cash flow to shareholders over time, but there was a decrease in buybacks in the second quarter. The CFO explains that this is part of their overall plan and not based on quarterly performance.

The company has a long-term plan to cut costs and improve profits. Despite a 5% increase in operating expenses, the company's goal is to reduce costs and increase revenue. The savings from cost-cutting will be seen in the company's operating margins and gross margins, which have already improved despite soft demand. The company believes that investing in growth opportunities while also improving margins is beneficial for the long-term success of the company.

The company has identified five growth areas and is investing in them, including AI PCs which they believe will bring value to shareholders. The improved margins are a result of both cost reductions and a shift towards more premium products. The company has committed to reducing their structural costs by $1.6 billion, and this has contributed to improved operating margins in both their PS and Print businesses over the past few years.

Enrique Lores, CEO of HP, discusses the company's plan to gain share in the print market in the second half of the year. He attributes their previous loss of share to aggressive competitors due to currency fluctuations, but says they have implemented cost-cutting measures to become more competitive. Despite the ongoing challenges in the market, Lores is confident that HP can grow share and maintain profitability.

The speaker discusses the company's revenue and operating profit dollars over the past few years, noting that while revenues have decreased, operating profit dollars and margins have increased. They explain that this is due to various factors such as market changes, a focus on profitable share, and declining supplies. The company still plans to grow revenue in the long-term and attributes the past changes to multiple factors.

In this paragraph, Enrique Lores, the CEO of a company, talks about the company's expected growth in the future. He mentions that they have the opportunity to continue growing between 2% and 4%. He also addresses a question about the company's print business, stating that they expect supplies to decline but will focus on growing their hardware business through higher ASP segments, services, and expanding into new markets. He also mentions being more optimistic about the growth of PCs.

The speaker discusses the impact of AI on the PC category and predicts a positive impact on growth. They expect PC unit growth to be small this year, with more growth in premium categories. The impact of AI is estimated to be in the low to mid-single digits for PC growth. They also mention that accessories and services will contribute to higher growth. The speaker is asked about competitive pricing dynamics and mentions that DRAM prices have gone up.

The speaker discusses the pricing dynamics for consumer and commercial products, stating that pricing was down on both a sequential and year-over-year basis. They expect pricing to be stable in the second half due to various factors such as growth in commercial sales and repricing for memory. They also mention a potential increase in demand for Chromebooks in the education sector, which could lead to a pickup in overall demand.

The speaker discusses a deal in Japan for Chromebooks that will start in 2024-2026 but states that the overall Chromebook business is not significant for the company. They also mention that they have started to see deals for Windows 11 refresh and a need to reduce support costs for older systems. They note that market share dynamics have changed in the past few years, with the top PC players not collectively gaining share during the pandemic.

Enrique Lores discusses the current state of the market and how it has shifted during the pandemic. He believes that the change in competitive dynamics has been a major driver, as well as a focus on more premium categories. He also talks about the potential for AI PCs to make up a larger percentage of units in the future and how this will benefit HP through higher prices and potentially accelerated replacement cycles.

The speaker believes that the average selling prices of AI PCs will increase due to the benefits they offer, such as faster speed, better data protection, and lower costs. They also mention a new model that optimizes performance for specific users and an increase in security for commercial PCs. They predict that adoption will start in the consumer market and eventually spread to the commercial market. The method of making consumers aware of AI PCs is not specified.

Enrique Lores explains that there will be multiple efforts to make consumers aware of the benefits of AI PCs, including marketing and communication from vendors, highlighting AI-supported applications, and training events in retail shops. He also mentions that there will be a big effort on training and communication in the coming months, particularly in the commercial space, to explain the benefits of AI PCs. This is something that has not been done in the PC space for a long time.

The company has defined this as a category creation moment because they realize that it will require a lot of effort to create this new category. There is potential for 5-10% increase in ASPs and 60% of units to move in three years, leading to 3-6 points of price increase. There may also be opportunities for HP to offer AI services or products through preloading Copilot. The speaker believes that the industry is about to see a major change in structure, with implications for semiconductors, operating systems, and applications. In the future, users will interact with their PCs by telling them what they want to do, rather than opening multiple applications.

The speaker believes that the current moment is a time of disruption and change in the industry, with new business models and opportunities being created. They discuss the potential for PC OEMs to capitalize on this, but note that Apple's unique operating system and control over its customers gives them an advantage. The speaker also mentions the importance of silicon in this changing landscape.

The pandemic has caused a decrease in printing, especially in office spaces due to hybrid work arrangements. The number of pages printed has decreased by 80%, but has remained stable as more people return to the office. In contrast, there was a spike in printing in home settings during the pandemic, but it has since declined and is still above pre-pandemic levels.

The speaker discusses the impact on the pages perspective from both the home and industrial side, with the latter seeing a recent recovery. They also mention the decline in hardware units and revenues and how it may affect supplies growth, but state that their long-term forecast for supplies remains unchanged. They mention four key factors that drive the supplies business: installed base, usage, share of supplies, and pricing.

The paragraph discusses the positive trend in the combination of hardware sales and extended printer life, which is expected to have a positive impact on long-term supplies revenue. The company has been making progress in their business model change, including a shift to HP+ models, growing big ink and toner categories, and increasing the number of subscriptions. Currently, 50% of shipments are from HP+ and big ink and toner categories, and there are over 13 million subscribers.

HP has three subscription programs for consumables, paper, and all-in, which are expected to continue growing. Around 50% of shipments are currently under subscription, and the penetration of Instant Ink in shipments is over 25%. HP has been interested in industry consolidation for many years and will only use their cash for acquisitions if it creates value. They would look for market adjacency and consolidation opportunities within existing markets. The consolidation has not played out as expected.

M&A is a key part of the company's strategy and will continue to be in the future. They prioritize acquisitions that support their growth businesses and have a strong filter for evaluating potential acquisitions. There has been some consolidation in the industry, but the company's approach remains the same and their focus is on growth opportunities. While they are open to consolidation, it is not currently a priority.

Enrique Lores, CEO of HP, discusses the potential for AI to accelerate conversations and drive growth in the company's business. He is most excited about the opportunities AI presents for disruption and transformation, as well as the potential to offer customers a complete experience. However, he also expresses concerns about the volatility of the world and the need to adapt quickly to changes. The company is working on building a more resilient supply chain in response to lessons learned during the COVID-19 pandemic.

Enrique Lores discusses the challenges and opportunities for growth in China and other countries where their presence has been smaller. He emphasizes the need to respond quickly to changes in the world, which can be both an opportunity and a concern. Toni Sacconaghi thanks him for his time.

This summary was generated with AI and may contain some inaccuracies.