HP CEO Weisler: Device-As-A-Service Pipeline Is 'Extremely Strong'

HP Inc.'s focus on shifting more of its personal systems business to a contractual model via the company's Device-as-a-Service offering is beginning to pay off, CEO Dion Weisler said Thursday as the company reported its latest quarterly financial results.

HP's Device-as-a-Service, or DaaS, aims to offer a simplified approach to device procurement, management, support and services for customers. The offering provides leased devices along with hardware repair and replacement support, predictive analytics for issues such as device health and security, and unified endpoint management. HP's device-as-a-service is provided by channel partners and, in some cases, directly by HP.

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During a conference call with reporters and analysts on Thursday, Weisler said DaaS is continuing to pick up steam.

"What we're seeing globally is definitely a trend and a pull from our customers from having a transactional relationship with us to having a contractual relationship with us and our partner ecosystem," Weisler said after a question from CRN during the conference call Thursday.

Customer willingness to "entrust the important work of running their personal systems fleet as well as their printing fleet to a trusted advisor in the business—not necessarily having to own it, but receive the outcomes—is a trend that we're beginning to see," Weisler said.

"The pipeline is extremely strong. There's good conversion of that pipeline," he said. "It's a trend that moves faster and slower relative to geography. But in my view it is definitely something that is going to become an increasing trend in the future."

Oklahoma City-based ImageNet Consulting recently developed a new security-focused solution for SMB customers built around HP's DaaS, which is seeing strong early demand, according to Juan Fernandez, ImageNet's vice president of managed IT services.

Especially notable, Fernandez said, is how the DaaS offering includes HP's TechPulse software for proactive identification of device issues—such as an impending battery or hard drive failure. "I think the visibility that HP DaaS gives us is incredible," he said.

On Thursday, HP reported that revenue hit $15.37 billion for its fourth fiscal quarter, which ended Oct. 31—representing 10.3 percent growth from $13.93 billion during the same period a year ago.

The company's personal systems business grew 11 percent during the quarter, year over year, to reach $10.06 billion in revenue.

During the call with reporters and analysts, HP chief financial officer Steve Fieler indicated that Device-as-a-Service is still not at the point of contributing significantly to the top line in personal systems.

"It is going to take time to play out," Fieler said. "Clearly we've got a very large revenue base in personal systems, so DaaS today is not a significant chunk of that. But over time we certainly would expect it to get larger."

Notebook PC revenue rose 14 percent year-over-year for HP, coming in at $6.17 billion during the fourth fiscal quarter. Desktop PC revenue climbed 6 percent to reach $2.99 billion.

In print, HP reported that revenue grew 9 percent to reach $5.3 billion in quarterly sales during fiscal Q4, up from $4.86 billion a year earlier.

Commercial hardware drove 16-percent growth over the same period of 2017, while supplies climbed 7 percent.

Non-GAAP net earnings during HP's fourth fiscal quarter rose to $865 million, or 54 cents per diluted share, up from $749 million, or 44 cents per diluted share, during the same period a year earlier.

For fiscal 2018 on the whole at HP Inc., revenue grew 12.3 percent to $58.47 billion, up from $52.06 billion in the prior fiscal year.

Non-GAAP net earnings for fiscal year 2018 reached $3.3 billion, or $2.02 per diluted share, compared to the prior-year results of $2.82 billion, or $1.65 per diluted share.

During a separate call with analysts Thursday, Weisler said that growth in personal systems over the next two quarters is expected to be somewhat constrained by the ongoing shortage in CPU availability from chip maker Intel. Fieler said HP is bracing for a "softening of personal systems revenue" as a result of the supply constraints.

The CPU shortage will "impact both the high-end and the low-end" personal systems sold by HP, Weisler said. The issue is compounded by the fact that demand for HP PCs is expected to be "really strong" in coming quarters, he said.

"Intel is working furiously to get capacity up," Weisler said. The executives did not offer specifics on how much revenue could be forfeited as a result of the CPU shortage.