UPDATED 21:34 EDT / OCTOBER 03 2019

POLICY

HP announces massive layoffs and a new printing business plan

Struggling computer and printer maker HP Inc. is planning to cut between 7,000 and 9,000 jobs over the next three years as part of a major new restructuring of its business.

Enrique Lores, who is set to take over as HP’s new president and chief executive officer next month, announced the plan during the company’s annual securities analyst meeting today.

He said the job cuts would include both voluntary early retirement and employee exits. The cuts are just part of the plan, though, as HP is also looking to adapt its business model in printers, boost dividends and expand its stock repurchase program.

Lores is set to take over the top job at HP from next month from the departing Dion Weisler, who is moving back to Australia to address a family health issue. He will assume his new role at a time when HP is struggling with weakness in its most critical printer supplies business, which is suffering from customer’s increased use of third-party inks.

Lores told analysts at the meeting the layoffs could yield annual savings of about $1 billion for the company. It will also take a $1 billion hit in charges related to the plan, including $100 million in the current quarter, $500 million in fiscal 2020 and the rest split between fiscal years 2021 and 2022. The layoffs will amount to about 13% to 16% of HP’s total workforce.

The company said it’s also extending its stock repurchase plan by $5 billion, in addition to the current $1.7 billion that remains on buyback authorization. In addition the company will also increase dividends for shareholders by 10%.

Just as important is the restructuring of HP’s printing business. The company is aiming to adopt a business model more akin to the cellphone market, wherein unlocked phones sell for higher prices.

The plan is to sell printers that can use ink from third-party suppliers at higher prices, while those that can only use HP’s ink cartridges will be sold for less.

Analyst Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE that he believed today’s moves were about getting ahead of expected changes to HP’s business.

“It needs funds to invest into software and services, and rather than adding debt or lower profits, it will reduce operational costs,” Moorhead said. “I spoke with incoming CEO Enrique Lores and he was adamant that this won’t decrease new products and services but accelerate them.”

In addition, Lores said, HP will create a new business licensing its microfluidics technology that’s used in 3-D printing for new applications such as cosmetics and healthcare.

“We are taking bold and decisive actions as we embark on our next chapter,” Lores said in a statement. “We see significant opportunities to create shareholder value and we will accomplish this by advancing our leadership, disrupting industries and aggressively transforming the way we work. We will become an even more customer-focused and digitally enabled company, that will lead with innovation and execute with purpose.”

Photo: Don DeBold/Flickr

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