Sat, Oct 05, 2019 - Page 10 News List

HP to cut up to 16 percent of workforce

‘NEW CHAPTER’:The company’s incoming CEO said that HP would announce ‘bold moves,’ while the firm has plans to adjust its printer strategy to offer HP-only ink

Bloomberg

HP Inc is to slash as much as 16 percent of its workforce as part of a broad restructuring meant to cut costs and boost sales growth amid the company’s first change in top leadership in four years.

The personal computer giant said it would cut 7,000 to 9,000 positions through firings and voluntary early retirements.

The job reductions would help save about US$1 billion by the end of fiscal 2022, the Palo Alto, California-based company said on Thursday in a statement.

HP had 55,000 employees as of a year ago, the last time it disclosed the figure.

HP also announced that it expects profit, excluding restructuring costs and other items, to be US$2.22 to US$2.32 per share in fiscal 2020.

Analysts, on average, estimated US$2.23 per share, according to data compiled by Bloomberg.

HP’s shares slid more than 5 percent in after-hours trading.

The firm released the projections as it faces uncertainties.

Dion Weisler, the chief executive officer who has shepherded the company since its 2015 split with Hewlett Packard Enterprise Co, is to step down on Nov. 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.

An activist investor might be building a stake in the company, a Gordon Haskett analyst said on Wednesday.

“We see ourselves starting a new chapter for HP and we will be announcing bold moves to support that statement,” Lores said in an interview. “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.”

HP’s reorganization will cost US$1 billion, resulting in charges of US$100 million in the fiscal fourth quarter, US$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,” HP chief financial officer Steve Fieler said about the job cuts in an interview.

HP’s board boosted the company’s share repurchasing plan by an additional US$5 billion. The company had US$1.7 billion remaining on its existing plan.

HP said it will also boost its stock dividend by 10 percent. The company’s shares have declined 10 percent this year, closing at US$18.40 in New York on Thursday.

The company said it expects at least US$3 billion of free cash flow in fiscal 2020 and will return 75 percent or more of that money to investors.

Along with financial metrics, the company said it would make changes to its printing unit to focus on providing more services. HP will raise prices for printers that can be used with non-HP ink cartridges, so that the hardware is more profitable, it said.

Currently, printers are sold cheaply and the unit’s operating profit margin is padded by the ink supplies. HP is to 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 healthcare and cosmetics industries, among others, it said.

“We are really confident about the future of the company,” Lores said.

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