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Will HP Move Beyond PCs Into 3D Printing?

Chris Lau, Kapitall: After a dip, HP has rallied despite the end of back to school season. Could 3D printing be the reason?

Instead of falling more after a weak back-to-school sales season for the PC market, Hewlett Packard (HPQ) shares are showing signs of life. Thanks to heavy competition from tablets, PC sales are declining, but HP may have another strategy in mind: Google’s (GOOG) Chromebook.

Chromebook could boost sales

For $279, the HP Chromebook will have an 11.6-inch screen and 16GB of fast solid state storage. Office productivity, a web browser, and email would suffice for the average student. Instead of relying on Microsoft’s (MSFT) Office suite and Windows OS, for that matter, the inexpensive Chromebook will offer offline app support.

Read more from Kapitall: Will Nintendo and AMD Benefit from Xbox, PlayStation Console Refresh?

This means apps would work outside a Chrome browser, and would support accessibility to core PC parts, like USB ports and the camera. Since Chromebooks could make up to 25% of the US sub-$300 laptop market, HP will likely still be a big player in PCs.

Unlocking value

HP is not stopping at inexpensive Chromebooks to remain relevant. The company could be selling its mobile IP portfolio. Many of the patents were acquired from the ill-fated Palm deal.

PC shipment growth outpaces Dell

In the third quarter, HP may have gained market share at Dell’s expense. Unit shipments grew by 1.5%, compared to 1% for Dell.

PC shipments

 

 

 

 

 

Source: Gartner (August 2013)

Foray into 3D printing

HP could also enter the 3D printing market, which would be a boost for the company’s prospects this up and coming market. Given the performance of 3D Systems (DDD), it would appear likely that HP will want to get in on 3D printing soon:

Click on the interactive charts below to see data over time. 

The forward earnings multiples are far higher for 3D printer companies. With HP’s valuation depressed, a focus to enter 3D printing could benefit shareholders.

HP could try to acquire a 3D printing company to speed up its entry into the market, but this may not be feasible. 3D Systems is valued at $7.2 billion, while competitor  Stratasys (SSYS) is worth $4.62 billion. HP also said in its conference call in August 2013 that it would be careful with its acquisition strategy.

The current focus for HP may be on past acquisitions. HP said: “we use strategic acquisitions to further our overall objectives as a company and we will be back in the market as we think about acquisitions that can further our objectives.” 

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