HP Inc (NYSE:HPQ) is losing sales of its PCs and printers, which contributes more than 80% to the company’s revenue. Much like other computer manufacturers, HP is facing competition from cloud based services and tablet PCs. Consequently, analysts have had mixed views on the company’s 1Q2016 report, with some pessimistic analysts expecting the company to report EPS of $0.38. The 1Q2016 is the first filing by the company, since it split into two entities.
The pessimistic view is based on the stocks history and its recent performance updates. HPQ has missed the top-line for the last 5-quarters. Additionally, the market for PCs has shrunk drastically, with figures reaching their lowest since 2007. HP alone has lost 22% in terms of PC sales on a year-over-year basis. Similarly, the company’s most profitable segment, printer sales, lost 17% in the last quarter. Some of this loss can be attributed to the rising dollar, which means currency conversion yields low-revenue.
As a result of its declining sales, HP is expected to exercise cost cut initiatives, which means an increase in layoffs. It is expected that around 3,000 workers in HP would face the axe, by the end of 2016. These figures are much higher than HP’s original layoff plan announced in September 2015. The original plan was to layoff several workers, over a period of 3-years, starting with 1,200 in 2016. The announcement in this regard was made by HP CEO, Dion Weisler.
The CFO of the company, Catherine Lesjak, stated that the layoff plan would help HP save $300 million by 2017. She also identified that the layoffs would be exercised in non-revenue generating departments. Areas like 3D printing would be relatively safer, since they are the main areas of the company’s growth. The CEO also revealed that HP is also focusing on developing new categories of computers that appeal to a wider array of customers.
HP Inc (NYSE:HPQ) had a trade volume of 21.75 million and gained 4.85% during the February 24 session, to reach a close at $10.81.
