Demand in the PC market is weak, and HP announced plans to "slim down".
After the US stock market closed on November 22, local time, PC manufacturer Hewlett-Packard (HP Inc) released its fourth fiscal quarter results for fiscal year 2022 as of October 31 this year, during which its revenue dropped by 11% to $14.8 billion, with a loss of $3.1 billion. Hewlett-Packard said that it plans to cut 4,000 to 6,000 people around the world in the next three years, or 10% of the 51,000 employees, in order to save costs and achieve transformation.
Hewlett-Packard said that this "Future Ready Transformation Plan" will reduce the company’s annualized total operating costs by at least $1.4 billion in the next three years, including about $1 billion related to restructuring. Hewlett-Packard said that of the $1 billion, $600 million will be allocated to the fiscal year 2023 ending on October 31, 2023, and the rest will be equally distributed between the fiscal years 2024 and 2025.
It has been three years since HP last laid off employees. The US Consumer News and Business Channel (CNBC) said that the company’s last layoffs can be traced back to 2019, when HP announced that it would lay off 7,000 to 9,000 employees. As of October 2021, HP had about 51,000 employees.
In the post-epidemic era, the dividend of home office faded, and consumers’ demand for personal computers decreased, which led to a sharp decline in the shipment of HP’s main product personal computers. Hewlett-Packard’s fourth-quarter financial report shows that the company’s revenue during the period decreased by 11.2% year-on-year to $14.8 billion; The net loss was $2 million, compared with the net profit of $3.1 billion in the same period last year, which turned a profit into a loss.
Source: HP Quarterly Report
In the fourth quarter, HP’s Personal Systems division, including personal computers, saw its revenue drop by 13% to US$ 10.3 billion, and its consumer business revenue dropped by 25% and its commercial business revenue dropped by 6%. In terms of shipments, HP’s total shipments decreased by 21% in the fourth quarter, including laptop shipments decreased by 26% and desktop shipments decreased by 3%; From the perspective of profitability, the operating profit margin of the personal system department decreased from 6.9% in the last quarter to 4.5%.
Source: HP Quarterly Report
Based on this, HP issued a pessimistic profit guideline. For the next fiscal quarter, the company predicted that the adjusted net profit per share would be 70 cents to 80 cents, which was lower than the analyst’s forecast of 86 cents. For fiscal year 2023, HP expects adjusted net profit per share to be $3.2 to $3.6, which is also lower than the analyst’s forecast of $3.62 per share. The company predicts that the market demand for personal computers will further decline in the next fiscal quarter.
Not only HP, but also the whole PC market is facing the dilemma of weak demand. According to the report released by research institute Gartner10 in October, global PC shipments totaled 68 million units in the past quarter, down 19.5% year-on-year, which is the biggest decline since the analysis institute began to track the PC market in the mid-1990s.
Gartner analyst Mikako Kitagawa believes that this marks a historic slowdown in the PC market. He said, "In view of the weak demand for personal computers from consumers and commercial markets, high inventory has become a major problem. Although many companies have carried out large-scale promotion and price reduction, the sales results are disappointing because many consumers have bought new computers in the past two years and there is no demand at present. In terms of business, geopolitical and economic uncertainties lead to more selective IT spending, and personal computers are not on the priority list of consumers. "
Dell Inc, HP’s competitor, faces the same problem. Dell’s total revenue in the third quarter fell by 6% to $24.7 billion. The company said that the weak PC market will continue, and it is expected that the decline in PC revenue will be even greater in the next quarter.
As of the close of US stocks on November 22nd, HP rose slightly by 0.75% to close at $29.38 per share.