Samik Chatterjee: Good. And for my follow-up, if I can just ask, the India market, they have instituted a ban, I think, or proposed a ban since from October 31 on PC imports. How are you thinking about sort of the implementation of that or what are you assuming in your guide relative to that impact? I know it’s not a big market overall, but just in terms of what you’re assuming and what are you seeing in terms of how to navigate that situation? Thank you.
Enrique Lores: Yes. So we don’t think there is going to be much impact of a potential ban in India in the short term. And in the long term, we had already been working for a while to increase our manufacturing capacity in India. You know in parallel to the ban, they launched also the local production plant, the PLI 2.0 plan. We have applied to participate on that, and we are working with them to ramp our manufacturing capacity there. India is not a huge market but is a very important market for us, where we see a lot of long-term potential, and this is why we are reacting to that. And in fact, maybe just to close, only this week, we announced with Jio the launch of the first cloud PC that we have been working with them for a while, which we think is going to — is a new category of PCs that are going to help us to really accelerate our growth in that country.
Samik Chatterjee: Thank you. Thanks for taking my questions.
Enrique Lores: Thank you.
Operator: Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open.
Erik Woodring: Great. Thank you for taking my questions this afternoon. Enrique, maybe can you dig into some of the PC channel inventory comments a bit more? Meaning how should we think about the specific regions where channel inventories might be more elevated than others? Are there any regions where channel inventories have normalized? Maybe how to think about that with traditional PCs versus Chromebooks, if there is any difference. And then ultimately, how that does impact your view on the 2023 PC TAM? I think last quarter, you talked about 250 million to 260 million units. How are you guys thinking about it today? And then I have a follow-up. Thank you.
Enrique Lores: Sure. Lots of questions in the question. I’ll try to cover everything. Now in terms of channel inventory, we are really pleased with the progress we have made normalizing our inventory. We are almost there, and I say almost because the area where we still have channel inventory is actually what you mentioned about Chromebooks. As you know, Google is going to be increasing the royalty prices in the coming weeks. And therefore, we saw at the very end of the quarter some increased orders and pull-up demand of customers and partners that wanted to take advantage of lower prices. So we ship those, and this is the area where we still have some high inventory. But for the rest, we are now in a good position. In terms of TAM, we have reduced slightly the TAM for fiscal year ’24 — for 2023.
Most of the reduction is coming from the new TAM in China that is really as the market has not grown as much as we were expecting, this has created some impact on the overall TAM. And then we have seen also a slight change between the mix of Consumer and Commercial where Consumer has been performing better and especially because of more sluggish demand on the enterprise side, we have seen the Commercial projection reducing. Thank you.
Erik Woodring: Super. That’s helpful. Thank you very much, Enrique. And then maybe just a follow-up, I wanted to get back to some of your comments on PC pricing. Maybe can you just talk about, again, some of those underlying factors in terms of relative to the July quarter, how we should think about the intensity of promotions, mix shift. And ultimately, I interpreted from your comments, we should be thinking about PC ASP growth sequentially just at a lower rate. I just want to make sure that’s the takeaway we should be taking away from your comments. Thanks so much.
Enrique Lores: So let me start there. So yes, our current assumption is that price — ASP for PCs will grow Q3 to Q4, but the growth will be more moderate than we were expecting a quarter ago. And again, the major driver of this is the fact that at the market level, we continue to see — or our estimate is that channel inventory is higher than what it should be. And therefore, we are going to continue to see pressure from a promotional perspective. There is also an element of mix. Hence, I also mentioned that Consumer in Q3 and we expect in Q4 perform better than expected, and we — the reverse happen on the Commercial side. And as you know, usually, ASPs for Commercial are better than ASPs for Consumer. Now what I think is important to highlight is our PC business grew from Q3 to Q2. We expect it to grow also from Q4 to Q3. So the recovery of the business is happening.
Erik Woodring: Super. Thanks so much for the extra color.
Enrique Lores: Thank you.
Operator: Your next question comes from the line of Sidney Ho with Deutsche Bank. Your line is open.
Sidney Ho: Thank you. I want to ask about the full year EPS guidance. The midpoint is coming down by $0.11, and I assume most of that is coming out of fiscal Q4. Based on your answer to a previous question, is it fair to assume most of that is coming from lower revenue? How big of an impact is lower margin also a factor? And then, are there other offsets that we should be thinking about?
Enrique Lores: Let me start talking about Q4 and then Marie will talk about the full year. So in Q4, as I said before, the majority of the impact comes from the change in the expectation that we have in PC pricing. We expect it to improve Q3 to Q4 but less than we were expecting before. And this has a significant impact on margin. There are other smaller factors like the size of the market in China, the enterprise performance where we have seen a slowdown of orders driven by industrial print. That also is a segment where we have seen an impact, but the majority of it comes from the price — the change in price assumptions for PCs. And then Marie, for the full year?
Marie Myers: Yes. So why don’t I just walk you through the full year here, Sidney? So basically, as Enrique said, it’s — Q4 is $0.08 and then we had a $0.03 adjustment for an accounting correction in the first half. So really just in terms of just the drivers, I think the right way to unpack it is it’s really the PC market size for the second half of calendar ’23 that’s smaller than expected and the industry CI comments that Enrique talked about. But I think the key is we’re going to see those improving ASPs as the quarter progresses but it’s less than we initially expected. So if you look at that plus the enterprise demand in PS and Print, that’s really what are the drivers of the $0.08 in Q4.
Sidney Ho: Okay, that’s helpful. Maybe as a follow-up, last quarter, you guys talked about commodities pricing being a tailwind for you in fiscal Q3, which seems to be the case. But fiscal Q4 could be different. Can you give us an update there? How long do you think those strategic buys that you have done be able to shield you from commodity price increases? Any way you can quantify that, that would be helpful. Thanks.
Marie Myers: Sure. So to give you some context there, Sidney, as you rightly said, we have seen the benefit of commodity costs in Q3 across both businesses, frankly, both Personal Systems and Print. There are some unique ICs in Print that are still somewhat in an inflationary state. But overall, the costs have been favorable for commodities in both businesses. We do expect that, that will carry forward into Q4. So there will be additional commodity cost declines in Q4 sequentially. And in terms of how we’re thinking about strategic buys, I would say — I think I’ve said this in prior calls, we do feel it’s really important to be operationally excellent. But frankly, we’re going to take advantage of opportunities that make financial sense.
