HP’s printer and ink business used to gush money. Those days may be over.
The company announced a major restructuring at its 2019 securities analyst meeting on Thursday. HP will reduce its workforce of 55,000 by 7,000 to 9,000—a cut of 13% to 16%. The move is supposed to save $1 billion a year by the end of 2022. To entice investors, HP mentioned a 10% boost in stock dividends and increased share buybacks.
HP may believe in its plans, but the sudden share drop and analyst downgrades and price-target reductions show investors don’t like what they hear. That may be for two reasons.
“It’s certainly possibly they could have a strategy that works,” Roy of UBS says. “[But] it doesn’t fit my experience.” Such a shift requires an enormous change on the part of HP’s customers, who may not like being told to pay more for printers or ink.
An HP spokesperson pointed to the restructuring announcement that quoted incoming HP CEO Enrique Lores as saying, “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. We will become an even more customer-focused and digitally enabled company, that will lead with innovation and execute with purpose.”
With an earnings announcement expected in November, we’ll soon find out if there’s more bad news to come. If that’s the case, investors might decide HP’s cartridge has run dry.