What happened
HP (HPQ +0.67%) trailed the market last month by dropping 13% compared with a 2% decline in the S&P 500, according to S&P Global Market Intelligence. The decline pushed returns for the tech stock down to -10% so far for the year, versus a 17% increase in the broader market.
Image source: Getty Images.
So what
August's slump was driven by weak operating earnings. HP announced late in the month that sales were flat in the fiscal third quarter. The company managed higher revenue in a few of its selling categories, including notebook and desktop sales. But the printing business, which delivers some of its highest profit margins, shrank 5%.
Now what
CEO Dion Weisler and his team have a plan to get the printing segment back on track, especially in the struggling European geography. Yet the bigger issue is the spiking competition that's driving prices down for ink refills and printer hardware. Without an effective answer to those threats, HP risks losing market share -- and that would mean lower profit margins and weaker growth ahead.
