Global computer company Hewlett-Packard (NASDAQ:HPINC) has announced further job cuts. The latest announcement anticipates between 3,000 to 4,000 jobs to cut globally over the next three years.
The announced job cuts are expected to generate gross annual savings of up to $200 million dollars per annum in labor charges from 2020. It is expected that an estimated $350 million to $500 will be spent in restructuring charges to facilitate these savings.
HP Inc Chief Executive Dion Weisler cited further challenging market conditions in the PC hardware industry. Core markets are challenging with slowing sales and reduced demand for hardware.
The company does however see some bright spots. Mobility and printing services are expected to drive growth over the medium to long term. The company recently purchased rival Samsung’s printer business in a $1.05 million deal. This is expected to generate some synergies while also securing the company a number of patents for future developments.
This latest round of job cuts comes on the back of several profit warnings. The company has made several attempts to reduce costs and streamline operations in recent years in response to slower growth and reduced profits. In total the company is on track to save over $1 billion since it split into two separate entities last year. HP Inc focuses on hardware while Hewlett Packard Enterprises supplies high end data storage solutions
The key problem for the company is that global sales of personal computers continue to decline. Earlier this week Gartner noted a 5.7% decline in PC shipments over the third quarter of 2016. This is the eighth consecutive quarter of declines which according to Gartner, represents the longest in the history of the PC industry.
As a results of the announcement shares in the company gaped down at the open. They did however gain some ground in later trading. At the close stock in HP Inc was trading at $15.15. This was 1.30% down on the day.
While the shares with a P/E ratio of 7.33 continue to look undemanding in comparison to rivals, this is no longer a high growth sector. The environment continues to look challenging and there are several hurdles ahead in an uncertain economic climate. This is reflected in the third quarter earnings for the company. These showed net income down over 4% year on year.
Against this backdrop the shares look expensive. Recent highs just short of $16 per share could be hard to take out given the latest news. While further gains could be seen, the upside looks limited. Pairs options contracts against IBM or Dell could offer a trading opportunity. A rate rise by the Fed would likely weigh on consumer on spending. This is something HP could do without, especially in a contracting market.