H-P Settles Lawsuit in Brazil

Hewlett-Packard Company (HPQ - Analyst Report) recently announced that it has resolved a patent infringement lawsuit pertaining to ink cartridges with Rio Branco Ltda. HP had sued Rio Branco in April last year.

Rio Branco Ltda., is a Brazilian distributor of Maxprint brand cartridges that are compatible with H-P printers. H-P had sued the Brazilian distributor over importing and selling the HP-compatible cartridges in Brazil.

Following the settlement, H-P's patents remained valid, and Rio Branco will no more be selling Maxprint cartridges. Maxprint will have to sell its inventory by December 1. Maxprint is also going to pay some of the litigation costs incurred by H-P.

However, H-P is exploring other channels to strengthen its presence in the Brazilian market. Some companies such as Canal Verde, Edeltec, Suprijet have confirmed that H-P's patents are valid and they have agreed to stop selling products that infringe upon H-P’s patents.

However, HP’s printing business continues to see many challenges, stemming mainly from macroeconomic concerns and secular changes in the printing market. While Lexmark’s (LXK) exit from the printing business could improve chances of share gains, this is not likely to be meaningful in the long term, as the inkjet market continues to shrink due to the easy availability of mobile media devices such as tablets and smartphones, which are reducing the need for taking printouts. Margins in the services business are also likely to remain weak this year.

The company is in dire need of rebounding, as it is constantly losing profit and market share. HP is implementing various strategies to generate growth. As discussed, the company is implementing some major restructuring actions to manage costs, drive growth and improve the health of its balance sheet.

Currently, the company retains a Zacks #3 Rank (Hold).