HP to ‘reduce cost structure’ in many core businesses, CEO says

Yahoo Finance Live anchors discuss HP’s restructuring plans.

Video Transcript

BRAD SMITH: HP stock, we're also watching that this morning after the company posted fourth quarter earnings that edged the Street's estimates, but served up weak outlook as the PC correction rages on. Now, Sozz here. There's a lot to really break down. You had actually spoken with the CEO, as well, of HP.

BRIAN SOZZI: Yeah, look, another tough quarter here. PC correction. When I talked to Enrique Lores, also really calling it, I think the first time-- we talk to him every quarter. I talked to him a lot about weakness in enterprise consumers, that commercial side of the business, large corporations pulling back on their spending or delaying buying a new printer or computers for the office.

But while you're seeing the stock, I think, the number one ticker on the Yahoo Finance platform this morning, and why the stock is up, despite sales falling 11.2%, is this new restructuring plan that the company outlaid, looking to cut about $1.4 billion in costs over the next few years. I asked Enrique why he's doing this.

ENRIQUE LORES: In terms of savings, we see savings coming mostly from three areas-- continue to invest in the digitalization of the company. We, during the last three years, we built a great digital platform that we can use now to digitize many different processes. We also can simplify complexity and reduce cost structure in many of our core businesses and align them to the new market sizing that we expect to see. And then also, in a company of our size, there are always opportunities to be more efficient from an operational perspective.

BRIAN SOZZI: And as part of this plan, they will-- HP will cut about 12% of their workforce or about 4,000 to 6,000 employees. Citi out with a note this morning saying these cuts alone can bring an extra dollar of earnings over the next two years. That's a big surprise for investors over at HP.

BRAD SMITH: Yeah, two key segments to really keep an eye on going forward with HP here. The personal systems, that revenue, that was down, actually, 13% year over year. And then some of their printing net revenue, that was down 7% year over year.

So you think about all of these categories that are part of this, what, future next strategy that they had put out there, or future-ready strategy, I should say, that the company has been talking about. And even with the cuts included, there's still a massive shift in the purchasing habits of some of their largest business clients that you would need to really see to enact some of that strategy, too.

JULIE HYMAN: And if you look across the tech landscape, right, there are some companies that are cutting right now because they see sort of a temporary slowdown in their businesses, whether it be the ad business that they rely on or various segments of business spending. In the case of HP, it could be acknowledging a sort of bigger, secular shift in the demand for personal computing, right? Yes, we had a demand for during the pandemic. But you do wonder if this is sort of a more permanent situation.

BRIAN SOZZI: Well, it's also, too, look at our own office. It's still, we're living in this hybrid world. Do you need that new printer next year in the office? Maybe not. Maybe the one you do have in your office that you've had for the past three or four years, it still works. So why going to upgrade it if you're not going to get a lot of people back off of that? And, you know, I noticed you noticed my blank paper. And just for that, I drew a happy face on it.

JULIE HYMAN: Yeah, there's no printed stuff on this paper. It's just the paper.

BRAD SMITH: Our printer works well. I can attest to that.

BRIAN SOZZI: It gets filled up throughout the show, guys. I'm not coming out here with blank paper.

BRAD SMITH: The happy face gets more illustrious through the show.