HP Inc. Accelerates Layoff Plan In 'New Normal' PC-Printer Markets, Making Big Innovation Bets To Drive Turnaround
HP Inc. is accelerating its cost-cutting plan with a move to eliminate 3,000 jobs in the current fiscal year rather than over a three-year period.
The much quicker time frame for the job cuts come with the newly independent company's core printing sales down 17 percent and the PC business down 13 percent in its first fiscal quarter, ended Jan. 31.
"We have got to get our non-revenue-generating cost structure down to operate in what we are calling the new normal," HP Inc. CFO Cathie Lesjak told Wall Street analysts in a conference call Wednesday after the company reported earnings per share in line with Wall Street expectations. "This is the environment in which we have to win and succeed."
HP Inc. expects the accelerated job cuts and other savings from restructuring activities in the second half of the year to result in charges and cash payments of $300 million in the current fiscal year.
The job cuts come even as HP Inc. ups its investment in research and development aimed at delivering breakthrough new offerings. In fact, HP CEO Dion Weisler has made it a "prime directive" that R&D would not be cut.
Weisler stressed that he sees a bright future as a result of a relentless innovation and "amazing technology" that includes a slew of innovative products coming down the road, including an eagerly anticipated 3-D printing launch this year and a highly touted HP A3 printing product aimed at disrupting the higher-priced copier market next year.
Speaking about the HP 3-D printing launch, which could come at the drupa printer fair in June, Weisler said HP has "groundbreaking, disruptive technology that will address both the production and prototyping space of the commercial markets. We are on track. I was recently in Barcelona doing a review with the team where it was developed. There is some super exciting stuff going on here."
Weisler also pointed to what he called the "revolutionary" launch of the Elite x3, a Windows 10 device launched at Mobile World Congress in Barcelona, Spain, this week that partners say effectively creates a new commercial mobility category. The new all-encompassing device can be used as a phone/phablet, laptop or full-fledged desktop, connected to a sleek, phone-sized docking station.
"Innovation is the lifeblood of HP," said Weisler. "As the global commercial PC leader, it is incumbent upon us to reinvent what the category is capable of and it is exciting to see the market's reaction to our progress."
Weisler's comments came after HP reported non-GAAP net earnings per share of 36 cents on a 12 percent drop in sales, to $12.2 billion. The Wall Street consensus was earnings per share of 36 cents on sales of $12.1 billion, according to a survey of analysts by FactSet. HP shares closed up 5 percent Wednesday, or 51 cents, at $10.82. HP shares were down 1 percent, or 16 cents, in after-hours trading at $10.66
"As you consider our financial performance for the quarter, remember that we operate in mature markets," said Weisler. "This is an environment where we know how to win, gain share and out-execute our competitors."
Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 232 on the CRN 2015 Solution Provider 500, applauded Weisler and the HP team for delivering groundbreaking new products that are fueling new opportunities for partners. "HP is making the PC world sexy again with sleek new products and a lot of innovation," he said. "The Elite x3, for example, is a full-function commercial phablet the likes of which we have never seen before."
Venero said he sees HP Inc. driving more innovation as an independent company since its formal split last November from Hewlett Packard Enterprise. "It's easier to hit a very specific target when you are more agile and focused," he said.
Despite the PC market downturn, Venero said, PC sales are up for Future Tech. "The PC is not dead as so many people are saying," he said. "My confidence is high in the HP Inc. team to add new exciting product lines and innovation to the market."