Jobs bloodbath looms at HP

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 04 Oct 2019

Computing giant HP is set to cut up to 9 000 jobs globally in the next three years.

The Palo Alto-based company yesterday posted its fiscal 2020 financial outlook and restructuring plan.

HP announced a fiscal year 2020 restructuring plan to “simplify its operating model and become a more digitally-enabled company”.

It expects to reduce gross global headcount by 7 000 to 9 000 employees through a combination of employee exits and voluntary early retirement.

The company estimates it will incur total labour and non-labour costs of approximately $1 billion in connection with the restructuring and other charges, with about $100 million in fiscal Q4 of 2019, $500 million in fiscal 2020 and the rest split between fiscal 2021 and 2022.

These actions are expected to be completed in fiscal 2022 and are estimated to result in annualised gross run rate savings of about $1 billion by the end of fiscal 2022.

Tough times

Responding to ITWeb on how this will impact local operations, HP’s global team states: “The industry is at an inflection point and we are making bold moves as we begin a new chapter of HP.

“This involves some difficult decisions, and we are deeply committed to helping affected colleagues during this transition. These are the toughest choices any company ever makes, but they are critical to positioning the company for the future.

“This is global restructuring and we’re not breaking down numbers by site or location,” HP says.

In August, HP announced CEO and president Dion Weisler, who served from 2015, was stepping down due to a “family health matter”.

Enrique Lores, president of HP’s imaging, will take over as president and CEO, effective 1 November.

“We are taking bold and decisive actions as we embark on our next chapter,” says Lores.

“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.”

“I’m proud of the progress we have made across our business with cutting-edge innovation, disciplined execution and a purpose-driven culture,” says Weisler.

“I have no doubt our team will keep raising the bar under Enrique’s leadership.”

For fiscal 2020, the company estimates GAAP diluted net earnings per share (EPS) to be in the range of $1.98 to $2.10 and 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, amortisation of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items.

Targeted outcomes

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 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 share repurchases.

“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,” says Steve Fieler, chief financial officer.

“I’m confident in our ability to execute with the multiple levers we have to drive profit and create value in our businesses.”

The board of directors on 30 September authorised an additional $5 billion for future repurchases of its outstanding shares of common stock.

HP intends to use the additional authorisation to repurchase its shares from time to time to offset the dilution created by shares issued under employee stock plans and to repurchase shares opportunistically.

As of 30 September, HP had approximately $1.7 billion of share repurchase authorisation remaining, prior to the board’s approval of the increase.