HP Announces Employee Layoffs, Restructuring

On October 3rd at its 2019 Securities Analyst Meeting, incoming HP Inc. CEO and President Enrique Lores announced a broad restructuring plan for HP that would include 7,000 to 9,000 employee layoffs. In 2018, HP Inc. had approximately 55,000 employees.

The restructuring plan is designed to simplify HP’s operating model and under it, the company expects to reduce gross global headcount by approximately 7,000-9,000 employees through a combination of employee exits and voluntary early retirement.

HP estimates that it will incur total labor and non-labor costs of approximately $1.0 billion in connection with the restructuring and other charges, with approximately $100 million in fourth-quarter 2019, $500 million in fiscal-year 2020, and the rest split between fiscal-years 2021 and 2022. HP expects to complete this in fiscal-year 2022, and estimates that it will realized annualized  savings of about $1.0 billion by the end of fiscal 2022.

Printer-Business Changes

HP’s printer-supplies business – traditionally the bread-and-butter for the company – has been hit by declining revenue, due to the increasing presence of cheaper non-HP clone supplies on the market, as well as  lower print volumes among users.

According to Bloomberg, HP is addressing these problems by making changes to its printing unit to focus on providing more services. It will also raise prices for printers that can be used with non-HP ink cartridges, so that the hardware is more profitable, and incorporate new technologies to ensure printers are only compatible with HP ink.

According to Market Watch, HP will unveil a new plan involving locked and unlocked printers: “Customers will have two options — either pay more for an unlocked printer and buy the ink of your choice, or pay less for the hardware with a locked printer that can only use HP printer-ink refills.”

HP said that it did not expect its printer-supplies business to grow in fiscal 2020-year and” executives declined to predict if supplies would grow again” according to Market Watch.

The company  will also start selling the “underlying technology of its inkjet printing, known as microfluidics, to the health-care and cosmetics industries, among others,” according to Bloomberg.

Fiscal-Year 2020 Outlook

For fiscal-year 2020, HP earnings per share (EPS) to be in the range of $1.98 to $2.10 and estimates non-GAAP diluted net EPS to be in the range of $2.22 to $2.32.

HP anticipates generating free cash flow of at least $3.0 billion for fiscal 2020.

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