HP Inc will slash as much as 16 per cent of its workforce as part of a broad restructuring that is meant to cut costs and boost sales growth. This comes amid the company’s first change in top leadership in four years.
HP Inc said it will cut 7,000 to 9,000 positions through firings and voluntary early retirement. The job reductions will help save about $1 billion by the end of fiscal 2022, the Palo Alto, California-based company said Thursday in a statement.
The company had 55,000 employees as of a year ago, the last time it disclosed the figure.
HP also announced it expects profit, excluding restructuring costs and other items, to be $2.22 to $2.32 a share in fiscal 2020. Analysts, on average, estimated $2.23 a share. HP’s shares slid more than 5 per cent in after-hours trading.
Enrique Lores to take over as HP CEO
The company released the projections as it faces a number of uncertainties. Dion Weisler, the chief executive officer (CEO) who has shepherded the company since its 2015 split with Hewlett Packard (HP) Enterprise Co, is stepping down on November 1 due to family health reasons.
The incoming CEO, Enrique Lores, is a longtime HP executive. “The company’s printing business, a major source of profit, has seen falling sales and recently was dubbed a melting ice cube by analysts at Sanford C Bernstein. And an activist investor may be building a stake in the company,” a Gordon Haskett analyst speculated on Wednesday.
“We see ourselves starting a new chapter for HP and we will be announcing bold moves to support that statement. We have spent a lot of time building this plan. We can embrace the changes we see happening in the market and that can help us position the company for the future,” Lores said in an interview.
HP’s re-organization will cost $1 billion, resulting in charges of $100 million in the fiscal fourth quarter, $500 million in fiscal 2020 and the rest split between fiscal 2021 and 2022, the company said.
The bulk of the savings will be in corporate functions, back-office support, Chief Financial Officer (CFO) Steve Fieler said.
HP expects $3 billion fresh cash flow in fiscal 2020
HP’s board boosted the company’s share re-purchasing plan by an additional $5 billion. The company had $1.7 billion remaining on its existing plan. HP said it will also boost its stock dividend by 10 per cent. The company’s shares have declined 10 per cent this year, closing at $18.40 on Thursday in New York.
The company said it expects at least $3 billion of free cash flow in fiscal 2020, and will return 75 per cent or more of that money to investors.
Along with financial metrics, the company said that it would make changes to its printing unit to focus on providing more services. HP will raise the prices for printers that can be used with non-HP ink cartridges, so that the hardware is more profitable. Currently, printers are sold cheaply and the units operating profit margin is padded by the ink supplies. HP will offer some lower-priced printers, but employ new technologies to ensure they are only compatible with HP ink.
HP will also start selling the underlying technology of its ink jet printing, known as microfluidics, to the health-care and cosmetics industries, among others.
We are really confident about the future of the company, Lores said.
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