The cuts came after the company released disappointing fiscal fourth-quarter earnings results and issued soft guidance for the next quarter. The company, which is said to have about 61,000 employees worldwide, plans to lay off between 4,000 and 6,000 over the next few years. It is part of a transformation plan aimed at realizing cost savings of up to $1.4 billion.
The plan will cost the company about $1 billion in upfront costs, but is needed due to a “volatile macro environment and weakening demand in the second half, with a slowdown on the commercial side,” the chief executive said. by HP Enrique Lores (pictured) on a conference call today. “We think it is prudent at this point not to assume that the market will change during 2023,” the chief executive added.
According to Lores, about half of the $1 billion in renovation costs will be realized within the next fiscal year. However, “the cuts are happening over three years, not the next few months,” he added.
The layoffs were announced on the heels of a fourth-quarter financial report that revealed an 11.2% drop in revenue to $14.8 billion. HP also reported a slight net loss for the quarter, primarily due to costs arising from a legal settlement. HP’s personal systems business, which represents sales of PCs and laptops, generated $10.3 billion in revenue, down 13% from a year earlier. Meanwhile, the company’s printer business added $4.5 billion, down 7%.
Shares of HP fell more than 3% in after-hours trading on the heels of that report, before climbing after news of the layoffs were announced, rising about 1.7%.
Pund-IT Inc.’s Charles King told SiliconANGLE that HP’s planned layoffs aren’t really a surprise given that PCs make up the lion’s share of its business. He said the company deserves credit for stretching the layoffs over a three-year period. “It means the process should proceed in a more sensible way, unlike the slash-and-burn terminations we’ve seen on Twitter over the last couple of weeks,” he said.
HP isn’t alone in predicting problems for the PC market. Just yesterday, one of its main rivals, Dell Technologies Inc., said it, too, is bracing for a sharp decline in PC sales. This came after the company reported a 6% decline in its overall revenue and a 17% decline in its Client Solutions Group, which accounts for PC sales.
Dell said it believes PC sales will decline even more in the fourth quarter and offered revenue guidance to reflect that. “We expect ongoing global macroeconomic factors, including slowing economic growth, inflation, rising interest rates and currency pressure, will weigh on our customers and, consequently, their IT spending intentions as well as they continue to digitize their businesses,” Tom, Chief Financial Executive Officer of Dell Sweet told analysts.
The news didn’t come as a complete shock. The PC market is slowing rapidly after seeing sales accelerate during the COVID-19 pandemic as people bought new machines to prepare for remote work and online learning.
Now that most people have a new computer and the economy is collapsing, people are shying away from buying such expensive items. Three months ago, Dell executives warned they were trimming their PC market expectations after analyst firms like Gartner Inc. and International Data Corp. predicted that PC sales were likely to post their worst decline in at least a decade .
With that in mind, HP executives said the company is seeking fiscal first-quarter earnings in the range of 70 to 80 cents a share, below Street’s forecast of 86 cents a share. For fiscal 2023, HP seeks earnings of $3.20 to $3.60 per share. The company has not provided any revenue forecasts.
“Looking at the bigger picture of HP, it’s hard to see where the company is without considering how deeply wrong former CEO Meg Whitman and her leadership team split HP into two companies in 2015,” King said of HP’s outlook. agency. “It was an act that left both organizations far less resilient than they had been together. If the economic turmoil continues into 2023, I expect the lesson to continue to be clear in the coming quarters.”
It’s not just PC manufacturers that are suffering from the crisis. Intel Corp. recently announced its own cost-cutting push and is said to be considering divestitures. Meanwhile, its rival chipmaker Advanced Micro Devices Inc. this month offered a weak sales forecast based on declining demand.
Show your support for our mission by joining our Cube Club and Cube Event community of experts. Join the community that includes Amazon Web Services and Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many other luminaries and experts.