Question-and-Answer Session
Operator
(Operator Instructions). Our first question is coming from Laura Conigliaro with Goldman Sachs. Please go ahead.
Brain Mansfield - Goldman Sachs
This is Brian Mansfield for Laura. My question is, with revenue down low-to-mid single-digit for the September quarter, can you take us once again through why such a profitability shortfall in Q3 and how long this will continue and specifically can you continue to grow hardware units at the current rate considering the price erosions that we have seen in this quarter and a little bit continue in the September quarter, and if so do you anticipate to be able to drive inkjet supplies growth to begin to recover these investments?
Paul Curlander
Brian, the impacts relative to profitability were the ones that we called out during the remarks. Obviously we are expecting to see a continuing decline in inkjet supplies in the third quarter from the second quarter level. We talked about an APC/LCM impact. In the quarter we talked about expected aggressive pricing and promotion, continuation. We also had an impact from increased units sequentially, and we had an impact from product cost.
So these are the major factors. These are clearly more margin issues, and mix issues, than just revenue issues, per say. But those are the major factors. Relative to the hardware we're clearly not happy where we are in the consumer market segment in terms of profitability certainly in the third quarter. We feel that we're in the difficult situation because we have these head win in terms of OEM units declining and supplies revenue declining.
Clearly we need to sell more branded hardware but this is turning out to be more expensive than what we had anticipated. We've launched a new wireless home printing initiative, so we need to drive that and need to make investments in R&D and development.
So our focus is, we want to work on the hardware unit placements to make that more affordable and we also looking for a better balance between units, unit sales and price. So that's our focus. And we're working cost and price so we're looking at prioritizing units as we go forward, so obviously these are some of the key factors that we'll be rolling out through third quarter and into the fourth quarter.
Relative to supplies, we certainly do believe that the products that we are selling will be driving future supplies. The issue around supplies fundamentally is the erosion in the install base. For us to ultimately turn that, we need to get the hardware units going more aggressively which is difficult with the OEM decline. At some point we'll be passed that we believe but certainly right now that's an issue for us. And we need to drive branded unit growth and our focus grow is going to be on wireless initiative as we go forward in time.
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