US tech firm Hewlett-Packard (HP) just announced plans for a major restructuring within the company, a plan that could involve the removal of over 7,000 jobs over the next three years. The company revealed late last week that the plan would be for the firm to transition from a hardware manufacturer to a software and services provider.
Incoming CEO Enrique Lores mentioned in a conference call that the decision was one of the toughest ones they had to make, but it was a necessary one to ensure the company's future.
The strategy was apparently part of Lores and HP CFO Steve Fieler's financial roadmap for the firm's fiscal year 2020. The plan was unveiled at the company's analyst day last week.
During his presentation, Lores stated that the plan included a 13 percent to 16 percent reduction in the company's workforce. With over 55,000 employees worldwide, the reduction would result in a loss of between 7,000 to 9,000 jobs in the next three years.
The executive stated that this should translate to about $1 billion in operational cost savings annually. The money saved from the workforce reduction will apparently be used towards investments to bolster the company's software and services business.
According to Lore, this was the company's way to "reinvent" itself.
Following the announcement of the job cuts, HP saw its shares fall by as much as 10 percent in late Friday. Lores did not specify which divisions within the company would be affected by the layoffs. However, the executive did mention that the company's "back-end infrastructure" would experience significant changes in the coming months as it becomes more digitally focused.
The 80-year-old tech firm, which was famously started inside a garage in Palo Alto, plans to expand beyond its hardware business to provide "true end-to-end solutions." The company plans to evolve its PC and printers business by focusing more on services and software.
Lores, who took over former CEO Dion Weisler in August, is aiming to turn around the company, which has been suffering from weak sales and revenues for the past few years. Weisler stepped down from his position due to "family health matters," but will still remain on the company's board.
HP's printer supply revenue recently dropped to $3.2 billion for its third quarter, a 7 percent dive when compared to the same period last year. The quarter was the company's worst year-on-year performance in over three years. Since the start of the year, HP's stock prices have plummeted by as much as 30 percent.