Amid a downturn in its printer business, HP has announced a restructuring plan that will reduce its workforce by as much as 18% over the next three years.
HP shares fell 10% on Friday to $16.55 on news that the company will shed between 7,000 and 9,000 jobs from its roughly 55,000 global workforce by 2020. It estimated the total costs of the restructuring at $1 billion with estimated annualized gross run rate savings of about $1 billion by the end of 2022.
As Business Insider reports, the restructuring comes at a “turbulent time” for HP with CEO Dion Weisler stepping down on Nov. 1.
“We are taking bold and decisive actions as we embark on our next chapter,” Weisler’s successor, Enrique Lores, said in a news release, adding, “We will become an even more customer-focused and digitally enabled company.”
HP, one of the two companies formed from the split of Hewlett-Packard Co. in 2015, is nearing the end of a three-year-old layoff plan that could eliminate up to 5,000 jobs.
According to The Wall Street Journal, it “has been under pressure from a decline in the printing-supplies business that was once its biggest moneymaker” as its printer customers have “migrated to buying their ink cartridges from other, cheaper vendors” rather than from HP.
Under a new sales model, buyers of discounted printers will be locked in to buying ink from HP while purchasers of higher-priced machines will still be able to use third-party cartridges.
“This is an interesting idea but implementation and what … peers do will be crucial to ensure Hewlett-Packard doesn’t end up losing market share,” Evercore Securities analyst Amit Daryanani wrote in a client note.
The restructuring will have a short-term effect on the company’s profitability. HP officials said Thursday they expect earnings of $1.98 to $2.10 per share for the year ending Oct. 31, 2020, below analysts’ forecasts of $2.18 per share.
Stripped of restructuring costs, HP projected a profit of $2.22 to $2.32 per share, compared to Wall Street’s $2.24 per share projection.
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