HPQ HP Inc

By Don Clark 

HP Inc. announced plans that include generating a bit less cash than analysts had anticipated in the next fiscal year while moving to further reduce the company's head count.

The big maker of printers and personal computers, which is grappling with declines in those markets, on Thursday disclosed plans during a meeting with analysts to cut 3,000 to 4,000 employees from its payroll over the next three years.

HP, formed in the breakup of Hewlett-Packard Co. a year ago, has trimmed about 3,000 employees since then. The company, which employs about 50,000 people, said it expects some people affected by the latest moves to keep similar jobs at separate companies that take over some HP operations on an outsourced basis.

HP said it expects the restructuring to generate $350 million to $500 million in charges and produce annual savings of $200 million to $300 million starting in fiscal 2020.

Aided by the effects of prior cost-cutting and other actions, the company told analysts it expects to increase its quarterly dividend by 7% in fiscal 2017 and report earnings in line with Wall Street expectations.

But HP executives acknowledged that they might disappoint some analysts with regard to free cash flow, a measure of the money left over after a company pays operating expenses. The company's shares have risen for much of 2016, in large part because of analyst expectations about improvements in that metric.

The company said it expects to generate $2.3 billion to $2.6 billion in free cash flow in the fiscal year ending in October 2017. That compares with analysts' average estimate of $2.76 billion for fiscal 2017 and $2.27 billion in the year ending in October, according to FactSet.

Cathie Lesjak, HP's chief financial officer, attributed the estimate largely to the company's success in the current fiscal year converting balance sheet items such as inventory into cash more quickly. Keeping up that pace of improvement, she said, will be difficult.

"It turns out to be a bit of a headwind," Ms. Lesjak said in an interview ahead of the analyst meeting in New York.

Ms. Lesjak said HP expects to return 50% to 75% of free cash flow to shareholders through dividends and share repurchases in fiscal 2017, a target the company has said it expects to exceed in the current fiscal year. HP plans to boost its share-buyback authorization by $3 billion, she said.

The company's stock, up nearly 30% this year through Wednesday's market close, declined 2% in Thursday after-hours trading following the announcements.

Dion Weisler, HP's chief executive, stressed that the company is taking market share in personal computers and expects to spur long-term growth in printers. The company in September agreed to buy Samsung Electronics Co.'s printer business for $1.05 billion, a deal designed to bolster HP's offerings in high-volume devices that handle both printing and copying for office work groups.

Still, Mr. Weisler acknowledged that demand remains weak in both businesses. "As I look forward to 2017, our assumptions are that the markets are going to continue to be pretty challenged," he said.

The company estimated it will report per-share earnings of $1.55 to $1.65 in its next fiscal year, excluding one-time items such as restructuring charges. Analysts on that basis had $1.64 a share for fiscal 2017, up from $1.61 a share in fiscal 2016, according to FactSet.

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

October 14, 2016 02:48 ET (06:48 GMT)

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