Almost a Fifth of HP’s Workforce now on the Chopping Block

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HP (NYSE:HPQ), the iconic visitor that manufactures computers and printers, announced today that information technology plans to reduce its headcount past 16 percent amid a broad-ranging restructuring plan that aims to cut costs, revive lagging sales and boost returns for shareholders.

The company has revealed that its restructuring will cost $1 billion with $100 million being charged in the quaternary quarter of the current year, $500 million in 2020, and $200 one thousand thousand each in 2021 and 2022. HP aims to get-go this cost past removing 7,000 to 9,000 employees from its electric current workforce of 55,000 through dismissals and voluntary early on retirements over the next three years. The Palo Alto-based visitor estimates that the layoff will yield about $1 billion in cost savings which, in turn, should be sufficient to cover the restructuring costs. HP's CFO, Steve Fieler, said in an interview that, "the majority of the savings will be in corporate functions, [and] back-role support."

HP's printing business, once considered a cash cow, has been in a persistent decline for some time now with the analysts at Sanford C. Bernstein recently terming it a "melting ice cube". Previously, HP used to sell its printers at a discount then accuse a hefty margin for the associated ink cartridges. This model, however, no longer works as users are able to buy these cartridges at a much lower rate from cheaper vendors. Therefore, the company plans to change this model every bit role of the broader restructuring. It will now allow its customers the option to buy printers at a discount and will then 'lock' such printers to the company'south cartridges by employing technological safeguards confronting tertiary-party cartridges. Customers will as well take the pick to opt out of this facility by paying a higher initial toll for the printer.

HP's lath of directors has also added $5 billion to the rest $1.7 billion from its previous share repurchase program in club to heave the visitor'southward stock price. Moreover, the company has indicated that information technology will return at least 75 pct of the $three billion in free cash flow expected in 2020 to investors through a x per centum quarterly dividend increase and share buybacks.

The announcement of mass layoffs comes at a disquisitional time for HP. It is currently preparing for a leadership change (read our previous coverage here) with the current CEO, Dion Weisler, stepping downwardly on Nov 1st due to "a family unit health thing". He will exist replaced past Enrique Lores equally the next CEO. Moreover, due to the ailing health of its printing business, HP'south stock price has declined by 10 percent this twelvemonth while the S&P 500 has gained 16 percent year-to-appointment. Nonetheless, HP hopes that its wide restructuring program will go a long way in turning its fortunes effectually.