HP (NYSE:HPQ) is generating a lot of headlines today on news that the personal computer (PC) maker plans to cut up to 6,000 jobs over the next three years, or about 10% of its global workforce.
HPQ stock is up slightly today as investors react positively to the Palo Alto, California-based company’s efforts to cut costs amid a continued decline in PC sales. According to industry analyst Gartner, global PC shipments declined almost 20% in the third quarter of this year, the biggest drop since the organization began tracking the data back in the 1990s.
HP said demand for personal computers has worsened this year as companies reduce their own workforces and cutback on technology investments as the shift to remote work becomes permanent. HPQ stock is down 22% this year and finished trading yesterday at $29.38 per share.
News of HP’s job cuts comes as the company issued earnings for the July-through-September quarter. HP said that its fiscal fourth quarter revenue fell to $14.8 billion, which was a bit better than Wall Street had expected. Profit in the quarter came in at 85 cents a share, also above analysts’ forecasts.
In terms of forward guidance, HP said it anticipates earnings of $3.20 to $3.60 per share for its fiscal 2023 year. The forecast assumes a 10% decline in computer sales in coming months. To manage costs and improve its finances, HP said it will cut up to 10% of its 61,000-person workforce over the next three years and also reduce its real estate holdings.
HP expects to incur about $1 billion in restructuring charges due to the job cuts and real estate sales. The company, which is also a leading maker of computer printers, said it plans to invest in new lines of business moving forward, and will focus more on subscription services.
Why It Matters
Investors are reacting positively to efforts by HP to cut costs in the wake of slumping PC sales. News of the workforce reduction, coupled with better-than-expected earnings and plans to pivot the company to new ventures, has investors feeling optimistic about HP’s future direction. While layoffs are no doubt difficult for the affected employees, it is a reliable way to reduce expenses and find cost savings.
HP is the latest technology company to announce layoffs. In recent weeks, Meta Platforms (NASDAQ:META) announced that it is cutting 11,000 employees, the biggest staff purge in its history. Amazon (NASDAQ:AMZN) has announced plans to cut 10,000 workers from its global headcount. The technology industry, in particular, is struggling with economic headwinds as interest rates continue to rise.
What’s Next After HP Layoffs
HPQ stock moves higher today on news that it is taking steps to right its own ship and improve its financial situation. With PC sales trending lower, the company appears to be right in its plans to develop new lines of business. Time will tell if the new ventures pay off for the company and its shareholders. In the meantime, the announced job cuts should help HP weather the current economic and market storms.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
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