Source: Ken Wolter/Shutterstock.com
resume (NYSE:HPQ) is making headlines today by announcing that the personal computer (PC) maker plans to cut up to 6,000 jobs over the next three years, or about 10% of its global workforce.
HPQ stock is up slightly today as investors react positively to the Palo Alto, Calif.-based company’s efforts to cut costs amid continued declines in PC sales. According to industry analyst Gartner, global PC shipments fell nearly 20% in the third quarter of this year, the biggest drop since the organization started tracking data in the 1990s.
HP said demand for personal computers has worsened this year, with companies cutting their own workforces and reducing technology investments as the shift to remote working becomes permanent. HPQ stock is down 22% this year and yesterday traded at $29.38 per share.
The news of HP’s job cuts comes as the company released its results for the July-September quarter. HP said its fiscal fourth-quarter revenue fell to $14.8 billion, slightly better than Wall Street had expected. Earnings for the quarter came in at 85 cents a share, also above analysts’ forecasts.
In terms of forward guidance, HP said it expects earnings of $3.20 to $3.60 per share for its fiscal year 2023. The guidance assumes a 10% decline in computer sales over the next few months. month. To manage costs and improve finances, HP said it would cut its 61,000-person workforce by up to 10% over the next three years and also reduce its real estate holdings.
HP expects to incur about $1 billion in restructuring costs due to job cuts and real estate sales. The company, which is also a leading maker of computer printers, said it plans to invest in new business areas in the future and will focus more on subscription services.
why is it important
Investors are reacting positively to HP’s efforts to cut costs following the drop in PC sales. News of the downsizing, coupled with better-than-expected earnings and plans to pivot the company into new ventures, has investors optimistic about HP’s future direction. Although layoffs are undoubtedly difficult for the employees affected, it is a reliable way to reduce expenses and save money.
HP is the latest technology company to announce layoffs. Those last weeks, Metaplatforms (NASDAQ:META) announced that it was cutting 11,000 employees, the largest staff purge in its history. Amazon (NASDAQ:AMZN) announced plans to cut 10,000 workers from its global workforce. The tech industry, in particular, is grappling with economic headwinds as interest rates continue to rise.
What’s next after the HP layoffs
Shares of HPQ rise today after learning that it is taking steps to right its own ship and improve its financial position. With a downward trend in PC sales, the company seems to be right in its plans to develop new lines of business. Time will tell if new ventures pay off for the company and its shareholders. In the meantime, the announced job cuts should help HP weather the current economic and stock market storms.
At the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.