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Hewlett-Packard’s (HPQ) – Growth from Commercial Printers

In the last few year’s H-P’s (HPQ) strategy on printers has changed from capturing the market share based on number of printer’s sold to ‘number of pages printed’ on H-P printers. While H-P has a 47% market share in the printer’s business, only about 1.6% of world’s total pages are printed on H-P machines. This would be the focus of H-P’s strategy as it moves ahead.

In the last five years, the Imaging and Printing Group has grown revenue from $19 billion to $30 billion and doubled its operating profit to $3.8 billion. H-P has been the worldwide market leader in printing since introducing its first inkjet and LaserJet printers in 1984. The company has sold more than 300 million inkjet printers since then and, in 2006, shipped its 100 millionth LaserJet printer. H-P’s imaging and printing intellectual property portfolio includes more than 12,500 patents worldwide.

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The revenue growth from H-P’s traditional printer sales is slowing. While global laser and inkjet printer sales are projected to rise about 5% this year to 125 million units, much of that growth is in low-end machines whose profit margin is shrinking, according to research firm Lyra Research. As a result, H-P’s revenue from inkjet sales has stagnated, hovering between $5.4 billion to $5.8 billion for the past three years.

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To offset this stagnant growth in profitability from low-end machines and In line with strategy of focusing on ‘number of pages printed’, H-P has been focusing on the large-format printers. In the past few years, H-P has acquired high-end press maker Indigo NV and large-format printer makers Scitex Corp.’s Scitex Vision and MacDermid ColorSpan Inc by shelling out more than $1 billion. On December 10th, H-P announced plans to acquire another large-format printer, NUR Macroprinters Ltd., for $117.5 million.

These acquisitions are expected to show effect on the revenues and bottom line in the next financial year. The stock market has been favorable to H-P. The price has moved up from $40/- as start of the year to $52/- as of yesterday. Overall the stock price has moved up by 30% over the course of the year.

Covered Calls:
The following covered call investing positions were found for H-P using PowerOptions search tool.

PowerOptions covered call search
Option Strike
HPQ 51.36 (-0.78) HPQAJ 08 JAN 50.0 (33) 2.5 4.9 2.3 2.3
HPQ 51.36 (-0.78) HPQAX 08 JAN 52.5 (33) 1.1 2.1 2.2 4.5
(For more details click the ticker symbol above)

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[tags] LaserJet, Lyra Research, HPQ, Hewlett Packard, covered call investing, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]

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