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HP Inc announces restructuring as it tries to get European supplies moving

PC and print manufacturer faces an uphill battle in its printer supplies business, particularly in Europe

HP Inc’s new chief executive officer is set to make a raft of job cuts as Dion Weisler, the man who took the company through its split from HP, steps down.

During last month’s earnings call for the company’s third-quarter 2019 results, Weisler announced that Enrique Lores would take over as the new CEO at the start of November. Lores currently heads up the company’s printer business, and it is this area of the business that HP said is not performing.

Lores unveiled the company’s restructuring plan, which he said would enable HP Inc to simplify its operating model and become more digitally enabled. The company expects to reduce its gross global headcount by 7,000-9,000 through a combination of employee exits and voluntary early retirement. 

HP Inc estimated that it would incur total labour and non-labour costs of about $1bn in connection with the restructuring and other charges, with about $100m in the fiscal fourth quarter of 2019, $500m in fiscal 2020 and the rest split between fiscal 2021 and 2022. After the restructuring, HP Inc said it expects to save $1bn by the end of fiscal 2022.

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

At a recent Citi 2019 Global Technology conference, the company described the challenges it faced in its printing business because of tariffs and underperformance in its European operations. In a transcript of the briefing posted on the Seeking Alpha financial blogging site, CFO Steve Fieler said: “In the print business with the recent tariffs that were implemented, we do anticipate raising prices on some print hardware that’s impacted, and so we’ll have to see how that may or may not impact demand.”

Fieler described the challenges facing the company’s print business as “temporal in nature” and said they were isolated and concerned operational challenges in printer supplies in the Europe, Middle East and Africa (EMEA) region.

Fieler said: “When we see a challenge, we name it; we address it; and we go after it hard. It’s the HP way. And that’s what we’re doing in EMEA.”

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He said the region experienced a 9% decline in printer supplies during the first half of 2019 and this decline has continued.“In Q3, our EMEA supplies were down mid-teens.” Fieler said the main driver for the declines was primarily within the commercial channels in EMEA.

Outgoing CEO Weisler had said previously that within printer supplies, the company was growing its contractual businesses and adapting its business models. Speaking at the company’s third-quarter 2019 earnings call, Weislser said HP Inc had improved its business management systems, strengthened its pricing discipline, improved channel partnerships and lowered EMEA channel inventory levels.

According to the transcript of the earnings call posted on Seeking Alpha, Wesler also said: “We are also making senior leadership changes in EMEA. We believe these are all-important steps in the right direction and there is still more work to do.”

Read more on Computer peripherals and printers

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