In response to weak PC demand, HP will cut up to 6,000 jobs over the next three years
A decline in the demand for personal computers has caused HP Inc. to reduce its workforce by as many as 6,000 employees over the next three years. HP said Tuesday that its earnings for the fiscal year ending in October 2023 will range from $3.20 to $3.60 per share, excluding certain items. In accordance with Bloomberg data, analysts projected a share price of $3.61, on average. A free cash flow of approximately $3.25 billion will also fall short of expectations.
It is forecast that computer sales will decline by 10% in the fiscal year, according to Enrique Lores, the company’s chief executive officer. According to him, the market environment will be challenging.
It has been difficult for HP, which primarily sells computers, to deal with a sustained decline in PC demand. Lores noted that the trend began with lower-end consumer goods but has expanded as companies reduce their workforces and cut back on technology investments. Gartner Inc., an industry analyst, reported that global PC shipments declined almost 20% in the third quarter, the largest decline since the company began tracking the metric in the mid-1990s. Approximately 55% of Dell Technologies Inc.’s revenue comes from PC sales, and the company announced on Monday that some customers have temporarily paused purchases.
As a cost-saving measure, HP plans to reduce its global workforce by as much as 10% over the next three years and reduce its real estate footprint. In fiscal year 2023, which began this month, the company will incur restructuring charges of approximately $1 billion. According to HP’s statement, the plan will save $1.4 billion annually by the end of fiscal 2025.
Woo Jin Ho, an analyst with Bloomberg Intelligence, stated, “It acknowledges the new realities of the printing and PC markets.”.
There have been numerous announcements in recent weeks regarding the reduction of workforces by technology companies. Each of Meta Platforms Inc. and Amazon.com Inc. has begun laying off about 10,000 employees, while Twitter Inc. has slashed more than half of its staff of 7,500 employees. Seagate Technology Holdings Plc manufactures hard drives. Earlier this week, Cisco Systems Inc. announced that it would be cutting about 3,000 jobs.
HP, which also manufactures printers, will invest in new business lines, such as subscription services. Lores indicated that the Palo Alto, California-based company currently offers ink subscriptions, and it is now exploring plans to offer other products such as printer paper and computers.
Revenues for the fiscal fourth quarter decreased by 11% to $14.8 billion, which was slightly better than analysts’ expectations. A profit of 85 cents per share, excluding certain items, also exceeded expectations.
A drop in consumer revenue of 25% led to a 13% decline in sales in the Personal Systems Group, which includes the computer business. The Printing unit reported a 7% decline in sales to $4.5 billion, which exceeded expectations.