HP's New Chief to Cut Up to 9,000 Jobs -- WSJ

Date : 10/04/2019 @ 7:02AM
Source : Dow Jones News
Stock : HP Inc (HPQ)
Quote : 22.64  0.0 (0.00%) @ 12:00AM

HP's New Chief to Cut Up to 9,000 Jobs -- WSJ

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By Maria Armental 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 4, 2019).

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 04, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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