Commentary

HP Slashing Work Force, Revising How It Sells Printers And Ink

HP, the side of the split-up Hewlett-Packard Co. that focuses on the sale of printers and the ink cartridges that fuel them, said in its “fiscal 2020 financial outlook and restructuring plan” yesterday that it was cutting up to 9,000 jobs in an effort to save about $1 billion annually by the end of 2022. It also announced plans to sell its products differently than it has been.

“We are taking bold and decisive actions as we embark on our next chapter. 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,” says Enrique Lores, who will take over the CEO position on Nov. 1 from Dion Weisler, Reuters’ Shubham Kalia reports.  

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In August, Weisler announced he was stepping down after four years at the helm for family health reasons and would be returning to his native Australia.

“The company’s printing business, a major source of profit, has seen falling sales and recently was dubbed a ‘melting ice cube’ by analysts at Sanford C. Bernstein. And an activist investor may be building a stake in the company, a Gordon Haskett analyst speculated Wednesday,”  Nico Grant  writes  for Bloomberg.

“We have spent a lot of time building this plan. We can embrace the changes we see happening in the market and that can help us position the company for the future,” Lores tells Grant.

“HP historically sold printers at a discount and then made money on ink cartridges, not unlike companies that sell razors at a discount and make their profit on the blades. ‘That model made sense when the goal was to penetrate more consumer homes and more offices,’ said Mr. Lores,” Maria Armental writes for The Wall Street Journal.  

“But users’ habits have been changing. Customers have migrated to buying their ink cartridges from other, cheaper vendors and have become more judicious in what documents they choose to print, hurting HP’s business.

“So HP is changing the sales model. It will still offer customers the option of buying their discounted printers, but then will lock them into buying ink from HP. It is not unlike smartphones that are ‘locked’ to a particular service provider. Customers also can opt to purchase printers at a higher price that would allow them to use third-party ink cartridges, Mr. Lores said,” Armental continues.

“HP will also start selling the underlying technology of its ink jet printing, known as microfluidics, to the health-care and cosmetics industries, among others,” Bloomberg’s Grant writes.

“This change in business model is not without risk, as Evercore Securities analyst Amit Daryanani pointed out in a note” during the 4½-hour annual investor meeting held yesterday after the plans were released, MarketWatch’s Therese Poletti reports.

“This is an interesting idea but implementation of this and what … peers do will be crucial to ensure Hewlett-Packard doesn’t end up losing market share,” Daryanani wrote.

“We need to optimize our business model, maximize the installed base of 150 million printers,” said Tuan Tran, who will take over as president of HP’s printing business when Lores becomes CEO, Poletti adds.

“The workforce reductions come as [HP] wraps up a three-year restructuring plan that included the elimination of up to 5,000 jobs,” the AP points out. “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.

HPE CEO Antonio Neri, meanwhile, “has been trying to re-orient HPE on engineering and innovation. He says those are the roots of the company’s legendary founders, William Hewlett and David Packard,” writesFortune's Susie Gharib, who recently conducted a video interview with him. 

“In the market we compete, you have to move really fast and when you miss technology or market trends, it’s hard to recover. We had our own lessons. We missed, you know, the cloud,” Neri, an engineer by training who has held almost every job in his company, tells Gharib. “So having a technology background makes a huge difference.”

William “Bill” Redington Hewlett and Dave Packard, Stanford University electrical engineer grads who launched their company with $538 in a Palo Alto car garage in 1939 to produce an audio oscillator, would no doubt agree.

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