“We have proven to be resilient in the face of changing market conditions,” CEO Enrique Lores said during an earnings call as the company reported its fourth quarter financial results. “We are now in a totally different market,” one channel partner said after the earnings call.
Palo Alto, Calif. PC and printing giant HP Inc. posted a tough financial quarter this week, promising cuts that include a workforce reduction of up to 6,000 employees (about 12 percent of the company’s global headcount) as part of a three-year cost saving plan that will place more focus on the company’s higher growth segments.
CEO Enrique Lores (pictured) laid out what HP is dubbing its “future ready” plan to trim 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 call). But slumping sales in other areas of the business – including consumer PC, notebook, and printer sales – contributed to the company’s 11.2 percent revenue decline for the fiscal 2022 fourth quarter compared to one year earlier.
[Related: HP Layoffs Will Cut Up To 6,000 Jobs Over Three Years]
Workforce reductions, Lores said, are not taken lightly. HP plans to offer support to affected workers. “As part of the actions we are taking, we will be reducing the size of our workforce over the next few years. These are the toughest decisions we have to make because they impact colleagues we care deeply about. We are committed to treating people with care and respect, including financial and career services support to help them find that next opportunity… while these are difficult decisions, we are doing what’s best for our business.”
For channel partners like Harry Zarek, founder of Ontario, Canada-based Compugen, the cost cutting measures were to be expected considering the current market. “This was no surprise as much of what was announced was anticipated across the IT sector,” he said. “After two years of strong demand, we are now in a totally different market. Nonetheless, the commercial business is holding up much stronger than the consumer business… The investments HP is making will hopefully help improve the end-to-end supply chain. Reduction in employees is always hard but is necessary given the economic forecasts.”
Lores said the company was forging ahead with growth efforts despite tough economic conditions.
Lores took the helm at the company three years ago, just before the COVID-19 pandemic caused a historic PC and tech demand spike 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 these past few years provides a window into what you can expect from us moving forward. We have proven to be resilient in the face of changing market conditions.”
Becoming ‘Future Ready’
Lores said the company would focus on three key elements for its three-year “future ready” plan, including an increased prioritization on digital transformation, “portfolio optimization” and operational efficiency.
With digital transformation, Lores said the company plans to “capitalize on infrastructure investments we made over the past three years and accelerate many processes through automation and end-to-end management.” This digital transformation will “drive productivity, speed and quality of our execution across our supply chain, customer support and go-to market,” he said.
Optimizing the company’s portfolio will also be key, Lores said. “I believe it’s essential that we zero in on businesses where we can drive significant competitive advantage and market leadership. We have an opportunity to create a more focused and more growth-oriented line of business based on innovation.” This would include the company’s increased focus on its peripherals business, which includes the recent acquisition of video conferencing equipment provider Poly. Lores said the company would expand its subscription offerings beyond Instant Ink to include paper and print hardware.
Operational efficiency will be achieved through cost cutting measures that are expected to generate at least $1.4 billion in gross annual run-rate savings by the end of fiscal 2025, Lores said. “We expect to operate in a challenging macro-economic environment during fiscal year 2023,” he said, adding that the company sees its cost-cutting measures adding up for a better second half of 2023. But “we are not assuming a significant economic recovery over the next 12 months.”
Compugen’s Zarek said he’ll be keeping his eye on developments and is especially keen to see how Poly’s contributions help HP partners. “I’m really interested in the Poly integration as this will be a catalyst for strong demand in meeting rooms and with voice and video accessories,” he said.
Lores said the company was pleased so far with Poly’s results after the recent completion of the acquisition. “In hybrid work solutions, we intend to leverage the combined strength of Poly and HP… while expanding in software and services to deliver differentiated hybrid work solutions for meeting rooms and home offices,” Lores said.