HP to Cut Up to 9,000 Jobs in New CEO's Restructuring Plan
October 03 2019 - 7:28PM
Dow Jones News
By Maria Armental
Incoming HP Inc. Chief Executive Enrique Lores is moving quickly
to imprint changes on the computer hardware maker with plans to
shrink the company's ranks by as much as 16% in a restructuring
plan that also aims to revive lagging printer sales.
HP Thursday said it could eliminate 7,000 to 9,000 jobs from its
roughly 55,000 workforce over the next three years. The cuts, once
completed, should yield annual savings of about $1 billion, the
company said at its annual securities-analyst meeting. HP is
nearing the end of a three-year-old layoff plan that could
eliminate up to 5,000 jobs.
HP has been under pressure in recent quarters from a decline in
the printing-supplies business that was once its biggest
moneymaker. To help reinject growth, it plans to offer new ways to
sell its products.
Before the printer business encountered difficulties, HP had
enjoyed stronger-than-expected growth since Hewlett-Packard Co. in
2015 split the company that Bill Hewlett and Dave Packard started
in their Palo Alto, Calif., garage in 1939. The other business,
Hewlett Packard Enterprise Co., focuses on selling computer
servers, data-storage gear and other services for
corporate-technology departments and was widely seen as the company
with more promising growth prospects.
Despite a decline in industrywide PC sales since 2015, HP has
expanded its market share, even as its total shipments also
declined, according to Gartner Inc.
Mr. Lores, who has run the HP printer business since the split,
in August was named to succeed CEO Dion Weisler, who said he was
leaving the company for family health reasons.
HP historically sold printers at a discount and then made money
on ink cartridges, not unlike companies that sell razors at a
discount and make their profit on the blades. "That model made
sense when the goal was to penetrate more consumer homes and more
offices," said Mr. Lores, who is slated to take over as CEO on Nov.
1.
But users' habits have been changing. Customers have migrated to
buying their ink cartridges from other, cheaper vendors and have
become more judicious in what documents they choose to print,
hurting HP's business.
So HP is changing the sales model. It will still offer customers
the option of buying their discounted printers, but then will lock
them into buying ink from HP. It is not unlike smartphones that are
"locked" to a particular service provider. Customers also can opt
to purchase printers at a higher price that would allow them to use
third-party ink cartridges, Mr. Lores said.
HP, which is set to report fiscal fourth-quarter financial
results next month, said it would take an initial $100 million
charge in the period tied to the new restructuring plan.
The cuts, company officials said Thursday, would allow them to
redirect additional money to areas of growth and shareholder
returns through a combination of higher dividend payouts and share
repurchases.
But in the short term the restructuring will weigh on the
company's bottom line. On Thursday, company officials said they
expect to deliver $1.98 to $2.10 a share for the year that ends
Oct. 31, 2020, below the $2.18 analysts surveyed by FactSet were
forecasting.
On an adjusted basis, which would strip out the restructuring
costs and other items, company officials projected a profit of
$2.22 to $2.32 a share, compared with analysts' projected $2.24 a
share.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
October 03, 2019 19:13 ET (23:13 GMT)
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