HP announces major job cuts as rising costs hit profit outlook

New Delhi: HP Inc. has declared a new chain of layoffs following the announcement of a lower than anticipated profitability during the present year. By fiscal 2028 the company is to remove between 4,000 and 6,000 positions as it relies more on AI tools in product development, customer support, sales and manufacturing. Enrique Lores, the CEO, said that the relocation is needed so that HP could stay competitive as growing component prices and changing market conditions squeeze the margins.

The restructuring will produce approximately $1 billion in savings on an annual basis by the close of 2028 but will also lead to some charges of $650 million, with approximately 250 million to be charged in fiscal 2026. HP has approximately 58,000 employees, which is low compared to three years ago when it had approximately 61,000 employees when it introduced a similar cost-cutting initiative. The most recent earnings expectations of the company were below the expectations of the analysts, and this pushed HP shares down by approximately 4% in the extended trading.

HP predicts profit without adjusting by some items to be between $2.90 and $3.20 per share in the year 2010, a year lower than the average analyst estimate of $3.32. This year, the company estimates that the earnings will be between 73 and 81 cents per share (current quarter ending in January) as opposed to 78 cents expected. Increasing prices of memory chips have narrowed margins, as a PC upgrade cycle generates new sales.

During the fourth quarter of the fiscal year 2009, which ended on October 31, HP grew by 4.2 percent in revenue to gain $14.6 billion, which is slightly more than the expectations. Adjusted earnings stood at 93 cents per share. The PC business increased 8 percent and was reinforced by the need to upgrade to Windows 11 and expand enthusiasm regarding AI-managed PCs. But even the printer revenue declined by 4 percent to $4.27 billion as per analyst expectations.

HP is further expanding out of China in the manufacture of products sold in North America to minimise tariff risks. The company is also diversifying to various suppliers of memory, changing product designs and increasing the prices where needed to cover the increased price of components. Nevertheless, the stock of HP is still dropping (by 25 percent this year), and this highlights the difficulty the company may face as it manoeuvres between the increasing cost and changing market needs.