Personal computing major Hewlett Packard will offload 4,000 to 6,000 employees by 2025 as part of its cost-cutting efforts under the ‘2023 Future Ready Transformation’ plan. HP is the first PC maker to have announced cuts in what seems to be a never-ending round of tech layoffs amid a “volatile macro-environment.”
In its Q3 2022 (Q4 FY ’22) earnings release, HP said it would downsize approximately 10% of its global workforce to save $1.4 billion in three years by 2025. “The company estimates that it will incur approximately $1 billion in labor and non -labor costs related to restructuring and other charges, with approximately $0.6 billion in fiscal 2023, and the rest split approximately equally between fiscal 2024 and 2025,” HP’s earnings release reads.
HP’s long-term cost-cutting strategy indicates that the company expects the PC demand to remain low while the global economy continues to underperform for the foreseeable future.
Manufacturers such as HP, Dell, Lenovo, Acer, etc., enjoyed a short-lived bump in PC demand last year as the pandemic-driven slump began to subside. However, companies have been reeling from diminishing PC sales this year, declining by 15% year-over-year, according to Canalys, in Q2, 2022.
Gartner’s Q3 2022 assessment revealed that PC demand slipped by 19.5% YoY in Q3 2022. Mikako Kitagawa, director analyst at Gartner, said, “This quarter’s results could mark a historic slowdown for the PC market.”
HP’s Q3 2022 revenue for personal systems (laptops and desktops) also declined by 12.95%, while its revenue from printers declined by just over 7%. Overall, HP’s total revenue in Q3 2022 slid by 11.23% YoY to $14.8 billion.
Comparatively, HP’s American counterpart Dell reported a 17% YoY decline in revenue for Client Solutions Group (laptops and desktops) to $13.8 billion in Q3 2022. But unlike HP, Dell’s other business arm, Infrastructure Solutions Group (storage, networking, and servers), posted a revenue of $9.6 billion, up 12% YoY .
HP’s operating margin for personal systems is down to 4.5% (from 6.5% last year). The company’s operating margin from its printer business increased to 19.9% from 17% in October 2021. During the earnings call, HP president and CEO Enrique Lores said, “We think that at this point it’s prudent not to assume that the market will turn during 2023.”
“Many of the recent challenges we have seen in FY ’22 will likely continue into FY ’23, including softer demand in both consumer and commercial and higher channel inventory levels across the industry,” said HP CFO Marie Myers. “We anticipate these factors will put continued pressure on overall pricing at least through the first half of ’23.” So expect a drop in PC prices.
See More: From the Great Resignation to the Great Layoff: What Ails the Tech Industry?
Dell CFO Tom Sweet echoed similar sentiments during the company’s Q3 2022 earnings call this week. “With what we know today, it’s likely next year’s revenue is below historical sequentials using our Q4 guidance as a starting point,” Sweet saidciting global macroeconomic factors including “slowing economic growth, inflation, rising interest rates and currency pressure.”
Macroeconomic uncertainties have also led to thousands losing their jobs. Not counting HP 137,159 employees have been laid off so far in 2022, according to layoffs.fyi. Crunchbase data shows that in the US, 73,000 tech workers were fired in 2022.
Major tech companies that have recently announced layoffs include Meta (~11,000 employees), Amazon (~10,000 employees), Salesforce (<1,000 employees), Intel (20% of the workforce), and Microsoft (~1,000 employees). Snap, Peloton, Netflix, Robinhood and multiple other companies have also let go of a significant chunk of their workforce.
Meanwhile, layoffs at Twitter can be attributed to leadership and ownership change to Elon Musk but would have been inevitable looking at its income statement.
Dell co-COO Chuck Whitten added, “The customer feedback is very similar to what we described in Q2, very cautious and deliberate behavior in the face of what’s a lot of economic — macroeconomic dynamics out there. So, we’re hearing reassessment of budgets, reprioritization of spending and customers buying effectively for just their immediate needs.”
Apple, whose revenue rose by 8.14% to $90.14 billion in Q3 2022, seems to be the only company beating the downturn. Apple also posted revenue of $394.32 billion in FY 2022 (ended September 2022), its highest ever.
However, Apple CFO Luca Maestri adjusted the company’s guidance for Q3 2022 (or Q1 FY 2023) revenue to be 8.1% lower quarter-over-quarter. Apple usually posts its highest numbers in the December-ended quarter, so an 8.1% drop from the previous quarter’s $90.14 billion would be a far cry from its last Q4 results ($111.43 billion in Q4 2020 and $123.94 billion in Q4 2021).
HP is trading at 22.72% below its January 2022 share price.
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