We are investigating HP Inc. (HPQ) (“HP” or the “Company”) for potential violations of the federal securities laws.
On February 27, 2019, HP reported disappointing total Supplies revenue for the first quarter of fiscal 2019, citing weaker-than-predicted demand from commercial customers in the Company’s Europe, the Middle East, and Africa market. In reporting these results, HP acknowledged that its traditional “four-box model”—focused on in-store base, usage, market share, and price (i.e., the four key drivers of revenue growth)—had been based upon incorrect data concerning inventory, market share, and pricing assumptions. HP also revealed that it lacked telemetry data to determine reliable market share assumptions for its Supplies business. Accordingly, the Company revised its previous estimate of Supplies revenue for fiscal 2019 to a decline of 3%, versus prior guidance of flat to slightly up revenue year over year. On these disclosures, HP’s stock price fell $4.12 per share, or 17.27%, to close at $19.73 per share on February 28, 2019. On May 30, 2019, at the Sanford C. Bernstein Strategic Decisions Conference, HP’s President and Chief Executive Officer Dion J. Weisler disclosed that the consumer segment of the Company’s supplies business had had telemetry data for years, meaning that management had known the importance of telemetry data for an accurate model and that the commercial Supplies business lacked this key input. On this news, HP’s stock price fell $0.46 per share, or 2.4%, to close at $18.68 per share on May 31, 2019. Then, on August 22, 2019, HP announced that Weisler would step down from his roles at the Company at the end of October 2019 due to a family health matter. HP also announced mixed earnings results from the third quarter of fiscal 2019, with Supplies revenue down 7% year-over-year.
On this news, HP’s stock price fell $1.12 per share, or 5.92%, to close at $17.81 per share on August 23, 2019. Finally, on October 3, 2019, HP announced that it was departing from the purely transactional Supplies-centric business model” and moving away from using the four-box model, transitioning instead to a hardware-driven business model. Under the new business model, HP would de-emphasize Supplies revenue as “the singular metric to determine our progress” and instead focus on “the key metrics [of] service growth and operating profit dollars, which better reflect[] the system profitability.” HP also announced mass layoffs as part of a major restructuring. On these disclosures, HP’s stock price fell $1.76 per share, or 9.57%, to close at $16.64 per share on October 4, 2019.