HP Inc. will cut as many as 6000 jobs in the coming three years as profit margins erode due to declining demands for personal computers.
Earnings per share are estimated between $ 3.20 and $3.60 for the fiscal year ending October 2023. According to Bloomberg Data, average analyst earnings are projected at $ 3.61 a share. Free cash flows are also below the estimates at $3.25 billion.
According to CEO Enrique Lores, the forecast assumes there will be a decline of 10% in PC sales in this fiscal year. HP’s major revenue is from PC sales, but the company has been navigating a continuous downtrend that started with low-cost consumer products. The effect has spread, leading to the company downsizing its workforce and reducing investments in technology.
Gartner Inc., a PC industry analyst, said that shipments for PC globally fell 205 in the third quarter, the biggest fall since the mid-1990s. Dell Technologies also reported a lackluster performance for the current quarter. The company, which earns 55% of its revenues from PC sales, said customers had paused the purchase for the time being.
In a statement, HP said it would cut around 10% of its 61,000-strong global workforce and reduce its footprints in real estate. The company will incur $1 billion towards restructuring expenses, 60% of which will be in the 2023 fiscal year. By 2025, the plan is to save around $1.4 billion annually.
An analyst at Bloomberg Intelligence, Woo Jin Ho, said that the declining PC sales are realities of the PC and printing market.
HP shares closed at $29.38 in extended trading Tuesday in New York, up by about 1 %. The stock has dropped 22% in 2022 so far.
Sustained Downturn
Other Businesses have also been cutting costs. Several tech companies in recent weeks, such as Amazon.com Inc. and Meta platforms Inc. have announced plans to reduce their workforce. Both companies have announced that they will be laying off around 10000 workers, while Twitter Inc. has already eliminated more than half of its 75,000-strong workforce.
Seagate Technology Holdings Plc. Makers of hard drives said it will cut around 3000 jobs, whereas Cisco Systems Inc. also unveiled a plan last week to cut unspecified close numbers of offices and cut jobs.
A New Line of Business
Apart from personal computers, the Palo Alto, California-based HP also makes printers which are getting affected too. The company plans to invest in a new line of businesses, for example, subscription services. Now they want to offer subscriptions for printer inks and plan for other products such as computers and printers.
The fourth quarter revenue fell to $14.8 billion, down 11 % compared to last year. However, the performance was better than analysts’ estimates. Profits after excluding exceptional items were 85 cents a share and better than estimates.
Sales revenue in the Personal Systems division, including the PC business, fell to $10.3 billion, down 13%. Printing unit sales dropped to $4.5 billion, down by 7%, while consumer revenue dropped 25%.
