Failing hardware market behind HP job losses

Trump or Brexit can't be blamed for the closure in Leixlip...

Failing hardware market behind HP job losses

Picture by Brian Lawless PA Wire/PA Images

With news arriving this morning that 500 workers at HP's Leixlip plant are set to lose their jobs, the road to a move that has shocked many is really a tale of two companies.

The Hewlett-Packard founded with a capital investment of $538 nearly eight decades ago in California, that arrived on Irish shores in 1976 and threw open the doors to its Leixlip plant in '95, hasn't actually existed for a couple of years now.

The splitting of the tech giant into two entities, HP Inc and Hewlett Packard Enterprise (HPE), in November 2015 highlighted the two options available at a fork in the tech road: sticking to your manufacturing guns or leaving increasingly obsolete hardware behind to look to a future of software and the cloud.

So, while Hewlett Packard Enterprise headed out with its own new NYSE ticker symbol to take a forward-thinking approach to software, servers, networking and IT services, HP Inc was given the old company's stock price history and tasked with keeping the PC and printing flame alive.

As they departed, the former had posted sales of $14.1bn, a 3% increase after adjusting for currency effects.

Today, the latter has announced its global print business in Leixlip will soon be no more.

The company said:

"This decision is not a reflection on our Ireland employees or on the site's performance. Ireland will remain a key market for HP, where we will maintain the sales operations for our printing and personal business."

In reality, though the extent of the job losses is a blow, it was a move that could be telegraphed for some time.

The stage was set for one to succeed and one to struggle.

In 2015, the last set of financial results filed as one trading entity showed that its PC and printer sales remained weak, down 14% each year-on-year, and that this would continue to be a problem area, albeit one completely dealt with by HP Inc from then on.

Looking specifically at the kind of products the Leixlip plant was involved in, sales of individual printers fell 17%.

Sales of printers sold to businesses fell 23%, while consumer sales fell 14%. Revenue from the sale of ink and paper were down 10%.

Chief executive Dion Weisler warned investors that the situation was unlikely to improve, saying:

"Looking ahead, we expect the PC market to remain challenged for more quarters to come."

Global restructuring

Some had high hopes that the split could somewhat reverse the company's fortunes, with Investopedia heralding the decision as it would allow business structures to be streamlined, give the two financial independence and foster improvements in innovation (chiefly in Hewlett Packard Enterprise's research and development, of course).

Indeed, there has been an improvement since HP Inc was formed. While 2016 revenue and profit were again down on the previous year, fourth quarter revenue results were ahead of the same previous period and earnings were ahead of forecast.

Despite some financial stability on the horizon, it decided to go ahead with a global restructuring aimed at helping save the company between $200 million and $300m annually. Late last year, HP Inc confirmed that it would cut between 3,000 and 4,000 jobs from a worldwide staff of 50,000 between 2017 and 2019. 

 

Maurice O'Connell, General Manager, at HP Inc's Leixlip Site. Picture by Brian Lawless PA Wire/PA Images

With the parts for inkjet printer cartridges streaming out of Leixlip, it's unlikely that workers there didn't see writing, in some form, on the wall.

On the bright side, those working for HPE at the same Leixlip site will be unaffected. Roughly 2,000 are thought to be employed there as part of its cloud and software business.