HP Plans Layoffs with PC Demand Slump Stretching Into Next Year

·         Dell warns of a Worsening Decline after a 17% Drop in Third-Quarter Laptop and Desktop Sales

HP Inc. HPQ 0.75% increase; green up pointing triangle said it would slash up to nearly 10% of its workforce with a sharp slump in demand for personal computers expected to stretch into next year.

The computer and printer maker, which currently has around 61,000 employees, on Tuesday said it would part with 4,000 to 6,000 employees as part of a transformation plan that aims to achieve $1.4 billion in annualized cost savings. The company had a payroll of about 51,000 people a year ago.

The cuts and other changes will come with about $1 billion in upfront costs, HP said.

“We think that at this point it’s prudent not to assume that the market will turn during 2023,” Chief Executive Enrique Lores said.

HP announced the layoffs as it reported an 11.2% drop in quarterly revenue to $14.8 billion. The company also posted a small net loss for the period, largely reflecting costs from a legal settlement.

A day earlier, HP rival Dell DELL 6.77% increase; green up pointing triangle Technologies Inc. also suggested the lull in PC buying this year would continue after a surge early in the pandemic.

Dell late Monday reported a 6% drop in overall revenue for the company’s third quarter, including a 17% drop in the unit that includes sales of laptops and desktops to consumers and commercial clients.

Dell expects revenue from PC sales to fall at an even steeper rate in the fourth quarter from the same period a year earlier, Chief Financial Officers Thomas Sweet said on a Monday earnings call.

“We expect ongoing global macroeconomic factors, including slowing economic growth, inflation, rising interest rates and currency pressure, to weigh on our customers,” he said.

The results come a month after data showed that PC demand in October slid at its fastest pace in more than two decades.

The PC market is slowing down after an acceleration of computer sales during the pandemic, when workers equipped their home offices and students required laptops for remote learning. Pandemic-era restrictions and stimulus payments boosted spending on big-ticket items while travel and entertainment expenses dwindled.

Now, consumers are changing their spending habits away from goods as they juggle concerns about inflation and the economy.

Continuing supply-chain constraints coupled with higher interest rates, persistent inflation and a stronger dollar are challenging operations and sapping consumer spending.

PC makers are adapting to the lower-demand environment. Dell said with customers no longer clamoring for new equipment, the company can use sea freight rather than relying on faster but more expensive airfreight, lowering costs.

Other tech companies are affected as well. Intel Corp. has embarked on a cost-cutting push and is considering divestitures as the chip maker tries to navigate the sharp drop in PC demand that has weighed on the company’s earnings. Rival Advanced Micro Devices Inc. this month issued a glum sales outlook for its current quarter as the chip maker expects demand to soften.

While most companies are experiencing a slowdown in PC demand, tech giant Apple Inc. reported record revenue for the latest quarter. Chief Financial Officer Luca Maestri cited new laptop launches and fulfilled pent-up demand after prior supply-chain issues as reasons for the surge in revenue.