HP Inc. is embarking on yet another massive restructuring of its business, with plans to cut 7,000 to 9,000 jobs over the next three years as the largest profit generator, printing, continues to reel off from soft demand printing and cheaper printing supplies .
Palo Alto, California-based computer and print giant told Wall Street analysts at its annual investor meeting Thursday that it will save about $ 1 billion over the next three years of the restructuring. Jobs will be cut through a combination of employee exits and voluntary early retirement. One of the biggest features of HP
will do is switch to more services in print: Customers will have two options – either pay more for an unlocked printer and buy the ink you want, or pay less for the hardware with a locked printer that can only use HP ink refills.
This change in business model is not without risk, as Evercore Securities analyst Amit Daryanani pointed out in a note during the meeting.
"This is an interesting idea, but implementing this and what … peers will be decisive for Hewlett-Packard not to lose market share," Daryanani wrote.
"We need to optimize our business model, maximize the installed base of 150 million printers, "said Tuan Tran, who will take over as president of HP's printing business when Enrique Lores takes the helm as the company's new CEO next month.
but it has been hit by two major factors: users who print far less, and copycats that produce cheaper HP supplies of clones to be used in HP printers, primarily in Europe, the Middle East and Asia. Bernstein Research analyst Toni Saggonaghi wrote in a note last month, "The printing business is more likely to be a" melting ice ", despite myriad HP efforts to improve business. "
Most of the questions during the 4½ hour meeting focused on the printing business. Saggonaghi asked if HP would eventually have to go for a new conversion once the benefits of the current plans are realized. "Will we get another billion dollars in restructuring in another three years?" He asked. HP said it did not expect utilities to grow in fiscal policy by 2020, and executives refused to predict whether supplies would grow again.
HP executives said they are also investing back in business by streamlining and transforming their way of selling and distributing products, especially in printing. In addition, on the overall business side, the systems are modernizing. For example, HP has used 13 different business resource planning systems that are consolidated into one. Still, not all of these efforts will change the fact that the main cash cow, ink, falls out of favor.
"This is why we think the solution to the problem is a shift in the business model," Lores said.
Investors had come to associate the old Hewlett-Packard Co. – before it spilled out into two companies, HP Inc. and company-focused Hewlett Packard Enterprise
HPE, + 0.42%
– with constant restructuring and reorganization as growth stopped. The goal of the 2015 split was to create two smaller and wiser companies. But none of the companies have managed to avoid cost cuts and layoffs, as headwinds came to different markets. HP Inc.'s utilities have been under severe attack over the past year, and the various solutions to solve the problems have not helped so far, though it made a big acquisition, and bought Samsung's printer business in 2017.
HP & # 39; s bold plans are not going to stop the changes in the market, and investors must now wake up to the reality of the changes facing the crown jewel.