HP has no easy way out of a printer jam

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Printer manufacturer HP announced this week that it would lay off up to 9,000 employees.


Photo:

Elise Amendola / Associated Press

The $ 1 billion reduction in spending will prove easy compared to HP’s other role Inc.

HPQ -3.87%

aims to get people to pay more for printers.

The PC and printer manufacturer presented an ambitious restructuring plan in an analyst meeting on Thursday. The plan is to lay off up to 9,000 workers, which would represent about 16% of the workforce. The company says this should translate into approximately $ 1 billion in annual savings when completed. Note that this comes three years after HP announced a similar plan that was originally intended to remove about 4,000 workers from their roles. The company’s workforce even increased by around 12% during this period.

The other part of the plan targets HP’s ailing printing business. For a long time, this segment was dependent on the so-called “Razorblade” model, ie printers were sold at a loss and the profit came from ink and toner accessories. But the advent of alternative consumables like third-party remanufactured ink cartridges makes this more difficult. As a result, HP plans to offer customers a choice of subsidized printers that work only with the company’s own supplies or more expensive hardware that accepts supplies from other sources.

That will take years, given the huge installed base of HP printers around the world. It’s also not safe, although the company points out that it has already tried this approach in China, where it has worked well. The other problem, however, is that the company’s new stated goal of maximizing operating profit in the printing sector is tacitly admitting that the consumables business is no longer growing. Historically, HP stock has not worked when its high-margin supply business was under pressure. The stock had already lost 9% this year after a string of disappointing results for the segment, and on Friday morning there was another 10% decline.

Granted, HP had to do something. Since the company split from its enterprise tech side in 2015, HP has relied on printing for 80% or more of the company’s total profits. But people and businesses just print less these days, which has resulted in HP’s shipping revenue falling an average of 3% per year over the past decade. Billing customers more for printers doesn’t make them print more.

Write to Dan Gallagher at [email protected]

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