HP Inc. Announces Plans to Cut Up to 16% of Workforce as Part of Restructuring Plan
HP Inc. presented its fiscal 2020 financial outlook to Wall Street analysts yesterday and also indicated a restructuring plan that will reduce its global headcount of about 55,000 employees by 7,000 to 9,000 workers (13% to 16%), through a combination of layoffs and voluntary early retirement during the next three years.
The Palo Alto, Calif.-based company estimates that it will incur total labor and non-labor costs of approximately $1 billion in connection with the restructuring and other charges, with approximately $100 million in fiscal Q4 of 2019, $500 million in fiscal 2020, and the rest split between fiscal 2021 and 2022. Expected to be completed in fiscal 2022, HP Inc. estimates that these actions will result in annualized savings of about $1 billion by the end of fiscal 2022.
The company has reportedly been under pressure due to its shrinking, but profitable, printing supplies business.
"We are taking bold and decisive actions as we embark on our next chapter,” said Enrique Lores, incoming president and CEO at HP Inc. “We see significant opportunities to create shareholder value and we will accomplish this by advancing our leadership, disrupting industries, and aggressively transforming the way we work. We will become an even more customer-focused and digitally enabled company, that will lead with innovation and execute with purpose.”
Lores, a 30-year HP employee — who started there as an engineering intern — had been president of HP's Imaging, Printing and Solutions business and is replacing Dion Weisler effective Nov. 1. Weisler joined the company in 2012 and became CEO in 2015. He is reportedly moving back to his native Australia due to a family health matter.
HP Inc. Presents Fiscal 2020 Outlook
According to a press release issued by the company, for fiscal 2020, HP Inc. estimates GAAP diluted net EPS to be in the range of $1.98 to $2.10, and estimates non-GAAP diluted net EPS to be in the range of $2.22 to $2.32. Fiscal 2020 non-GAAP diluted net EPS estimates exclude $0.22 to $0.24 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items.
Based on the current environment, HP anticipates generating free cash flow of at least $3 billion for fiscal 2020. In fiscal 2020, the company indicated that it expects to return at least 75% of free cash flow, with a 10% increase in the planned quarterly dividend amount, and the balance returned to shareholders through an additional $5 billion share buyback plan.
“In FY19, we continue to deliver on our financial commitments, with consistent company-level performance, non-GAAP EPS, free cash flow, and return of capital,” said Steve Fieler, HP Inc. CFO. “I’m confident in our ability to execute with the multiple levers we have to drive profit and create value in our businesses.”
HP Inc. was created in 2015 when Hewlett Packard split its PC and printer operations from its businesses specializing in data center hardware and business software. That part is now known as Hewlett Packard Enterprise.