“We have shown resilience in the face of changing market conditions,” CEO Enrique Lores said during a conference call as the company reported its fourth-quarter financial results. “We’re in a completely different market now,” a channel partner said after the conference call.
Palo Alto, California. PC and printing giant HP Inc. had a tough fiscal quarter this week and promised cuts that include job cuts of up to 6,000 employees (about 12 percent of the company’s global workforce) as part of a three-year cost savings plan that puts a greater focus on the higher-growth segments of the company.
CEO Enrique Lores (pictured) laid out what HP is calling its “future-ready” plan to cut costs while focusing on its growth portfolio, which includes gaming, peripherals and hybrid work solutions. Those growth areas showed promise this quarter, bringing in $11 billion in revenue (about $1 billion more than expected, Lores told industry analysts during the earnings call). But slumping sales in other businesses — including sales of consumer PCs, notebooks and printers — contributed to the company’s 11.2 percent year-over-year revenue decline in the fourth quarter of fiscal 2022.
[Related: HP Layoffs Will Cut Up To 6,000 Jobs Over Three Years]
Downsizing, Lores said, will not be taken lightly. HP plans to support affected employees. “As part of the measures we are taking, we will be reducing our workforce over the next few years. These are the most difficult decisions we have to make as they impact colleagues we care deeply about. We strive to treat people with care and respect, including financial and professional support to help them find their next opportunity… while these are difficult decisions, we do what is best for our company.”
For channel partners like Harry Zarek, founder of Compugen, based in Ontario, Canada, the cost-cutting measures were to be expected given the current market. “That was no surprise as much of what was announced was expected across the IT sector,” he said. “After two years of strong demand, we are now in a completely different market. Nonetheless, the commercial business is holding up much stronger than the consumer business… Hopefully the investments HP is making will help improve the end-to-end supply chain. Downsizing is always tough, but necessary given the economic forecasts.”
Lores said the company is continuing its growth efforts despite difficult economic conditions.
Lores took over the helm of the company three years ago, just before the COVID-19 pandemic caused an all-time surge in PC and technology demand for remote work needs. “From the day I took over, my top priority has been to deliver long-term, sustainable, profitable growth while transforming our business for the future,” he said during the call. “And our track record over the past few years offers a glimpse of what you can expect from us in the future. We have proven resilient in the face of changing market conditions.”
Become “Future Ready”.
Lores said the company will focus on three key elements for its three-year “future-ready” plan, including increased prioritization of digital transformation, “portfolio optimization” and operational efficiencies.
According to Lores, with the digital transformation, the company plans to “benefit from the infrastructure investments of the last three years and to accelerate many processes through automation and end-to-end management”. This digital transformation will “increase the productivity, speed and quality of our execution across our supply chain, customer care and go-to-market,” he said.
Optimizing the company’s portfolio will also be crucial, Lores said. “I believe it is important that we focus on companies where we can achieve significant competitive advantage and market leadership. We have an opportunity to create a more focused and growth-oriented business based on innovation.” This includes the company’s increased focus on its peripherals business, which includes its recent acquisition of video conferencing equipment maker Poly. Lores said the company will expand its subscription offerings beyond Instant Ink to include paper and printing hardware.
Operational efficiencies will be achieved through cost reduction measures that are expected to generate at least $1.4 billion in annual gross savings by the end of fiscal 2025, Lores said. “We expect to operate in a challenging macro environment in fiscal 2023,” he said, adding that the company expects its cost-cutting efforts to pay off for a better second half of 2023. But “we don’t anticipate any significant economic recovery over the next 12 months.”
Compugen’s Zarek said he will be keeping an eye on developments and is particularly excited to see how input from Poly HP partners is helping. “I’m really interested in the Poly integration as it will be a catalyst for strong demand in meeting rooms and voice and video accessories,” he said.
Lores said the company is pleased with Poly’s results so far following the recent closing of the acquisition. “In hybrid work solutions, we intend to leverage the combined strength of Poly and HP…while expanding software and services to provide differentiated hybrid work solutions for meeting rooms and home offices,” said Lores.