HP Layoffs, Tech Layoffs Continue
Layoffs in the tech sector continue to build. Recently, we learned that HP (HPQ) is planning on making cuts. Management has indicated that it might be a slow, prolonged cut between 4,000 and 6,000 jobs by the end of its 2025 fiscal year. HP had previously reported having a global headcount of some 51,000 employees.
The computer maker disclosed the major job cuts in a statement accompanying its lackluster quarterly earnings report, where it also said sales dropped more than 11% compared to the same period last year.
CEO Lores admitted that after a difficult fiscal fourth quarter, and not-so-great outlook, cutting potentially more than 10% of HP’s workforce was necessary. Lores said the job cuts are part of a strategy to create a “Future Ready” HP.
The company provided a range of adjusted fiscal first quarter earnings from 70 cents to 80 cents per share, below the consensus of 86 cents among analysts polled by Refinitiv. For the 2023 fiscal year, HP called for $3.20 to $3.60 in adjusted earnings per share, below the Refinitiv consensus of $3.62 per share.
Wage growth data indicates that highest wage earnings saw the largest decline in real wages, whereas lowest earners’ wage growth largely matched inflation. As a result, companies are seeing high-income consumers trading down for cheaper goods/services – mentions of ‘trade down’ during earnings calls soared to a record level, topping the GFC level.
Lores said at a conference for investors and analysts that the “ultimate goal” of the company is to develop its product portfolio and “operational capabilities to drive sustainable growth” and save as much money as possible during what is expected to be a prolonged period of economic uncertainty, inflation and some declines in customer demand.
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Lores, and CFO Marie Myers said that the job cuts were part of a plan that would cut costs and generate “run rate savings” of at least $1.4B by the end of HP’s 2025 fiscal year. “We take (job) reductions very seriously,” Myers said, and added that the steps HP was taking were “critical to the long-term health” of the long-time PC and printing technology leader. But, in the meantime, factors such as “headwinds to long-term growth” are going to be around for a while.
Insight: What do the Layoffs Signal?
Layoff announcements are not a reliable guide to jobless claims in the short term.
But we cannot ignore the upward trend in recent months; claims likely will follow.
Layoff pressure is building, with a weekly record number of layoff news on Bloomberg, following the notable headlines from META and AMZN.
Monthly new job postings have plummeted YTD, down 30% for the S&P 500 (SPY) YTD, led by high-paying jobs in Tech (XLK) and Financials (XLF): Comm. Svcs. (XLC) -63%, Tech -47%, and Financials -34%.