HP is facing internal and external challenges, and time is running out for the company.

Under performance pressure, HP's layoffs are an inevitable choice for its strategic transformation and cost control. However, to achieve a flexible turnaround, beyond personnel adjustments and the AI PC bet, more coping strategies need to be found.

Original @新熵 Author 丨 Jiang Li Editor 丨 Jue Ying

In his later years, David Packard, one of the founders of HP, constructed a management philosophy centered on "treating employees well" in his masterpiece "The HP Way."

However, in the current environment surrounded by competitors and under performance pressure, the once-sacred "people-oriented" rhetoric has had to compromise with the reality of the company's cost control needs.

On October 16, the long-rumored layoffs at HP's Taiwan branch were finally confirmed: layoffs will be carried out in two phases starting in October, this adjustment will for the first time involve the R&D department, with an estimated 20 to 30 employees to be cut, including even vice president-level executives.

In fact, as early as 2022, HP had announced to the public its plan to lay off 4,000 to 6,000 employees over the next three years to save costs.

This downsizing is undoubtedly driven by the need to cope with performance pressure and navigate the industry's deep waters. Additionally, keywords such as "first major move against the R&D department" and "involving executives," coupled with rumors that it will recruit 200 engineers to reduce reliance on its Taiwan R&D center, signal that HP's future transformation plan is in full swing.

As a veteran international PC giant, HP has gradually lost its voice in recent years. The last time it sparked heated discussion was in August this year, when British billionaire Mike Lynch's yacht accident brought to light an $8.8 billion century-old fraud case.

Setting aside the mysterious "bizarre death of a billionaire" anecdote, HP's decline is actually hidden in the subtle clues of industry development.

Behind the Layoffs, the Twilight of the Gods

In 2022, on the same day HP announced its layoff plan, it released its Q4 and full-year earnings report for fiscal year 2022.

The report showed that the company's net revenue for Q4 was $14.801 billion, down 11.2% year-over-year; it reported a net loss of $2 million, turning from profit to loss compared to the same period last year; adjusted net profit under non-GAAP was $900 million, down 21% year-over-year.

In the years following the announcement of the layoff plan, HP's profitability remained far from ideal. Since Q3 of fiscal year 2022, its operating income has experienced consecutive declines.

In Q3 of fiscal year 2024, HP achieved $13.5 billion in revenue, up 2.4% compared to Q3 of fiscal year 2023, marking its first year-over-year revenue growth since Q3 of fiscal year 2022. However, net profit for the quarter fell by 16% year-over-year.

HP's financial woes are closely tied to the global PC industry's winter in recent years.

IDC data shows that from Q1 2022 to the second half of 2023, global shipments of traditional PCs, including desktops, laptops, and workstations, experienced consecutive declines.

The reasons for the PC industry's winter are no mystery: the global economic downturn caused by the pandemic, slowing innovation in the PC market, partial functional replacement of PCs by mobile devices like smartphones, and increasingly fierce competition within the industry.

In fact, HP is not the only one affected by the industry's chill.

Lenovo's smart device revenue fell by 20.77% and 9.67% in fiscal years 2023 and 2024, respectively. In the first half of this year, the company's net profit attributable to shareholders was only 285 million yuan, down 57.2% year-over-year.

Regarding the decline in performance, Lenovo Holdings explained that the complexity and uncertainty of the global economic situation continue to rise, and the profits contributed by the industrial operations sector have been affected by market and industry fluctuations, leading to a year-over-year decline; the investment business in the industrial incubation and investment sector has also seen a year-over-year decline in returns due to unfavorable market conditions.

Another PC giant, Dell, although maintaining relatively good profitability in recent years, has also faced revenue growth challenges since 2022.

Intel, which holds a monopoly position in the semiconductor industry and is a major global supplier of PC processors, has even been rumored to be acquired. In September this year, The Wall Street Journal reported that Qualcomm had discussed acquisition matters with Intel.

Against the backdrop of an industry downturn, layoffs and strategic transformation seem to have become the unified answer for giants to alleviate performance pressure.

In addition to HP, Dell planned to lay off 5% of its workforce in 2023, but the actual number of layoffs reached 13,000. In early August this year, Dell confirmed a new round of layoffs, with an estimated reduction of up to 12,500 employees, stating that the company is streamlining operations by restructuring its marketing team and taking a series of ongoing actions.

Lenovo disclosed in its fiscal year 2024 earnings report in May that its global headcount had decreased by 7,500 compared to the same period in fiscal year 2023. In the "expense category" of the earnings report, Lenovo stated that due to industry challenges, it incurred severance and related expenses of $55 million.

The Rise of Domestic Brands, Caught Between a Rock and a Hard Place

As an important part of its global business, the Chinese market has long been a key region for HP. Since entering the Chinese market in 1985, HP China has maintained rapid business growth for nearly 40 years and was once one of the fastest-growing subsidiaries in HP's global operations.

However, with the wave of industrial transformation in China, HP is now caught in a dilemma between new and old brands. When disclosing its Q3 earnings for fiscal year 2024, HP stated that it had encountered a slowdown in the Chinese market, with weak sales of PCs and printers.

In the printer business, Canon, Tsinghua Tongfang, Razer, and Hasee have been gradually eroding HP's market share in recent years. As for the PC business, which accounts for over 60% of its revenue, HP faces even greater pressure.

On one hand, Lenovo, rooted in China, clearly has more Chinese DNA compared to HP due to its influence in the global market, and thus has long held the top spot in domestic shipments. On the other hand, new-generation domestic brands represented by Huawei are accelerating their pursuit.

While international brands are declining, domestic brands are rising rapidly, undoubtedly putting HP in a tight spot.

One statistic shows that the sales share of international brands has dropped from 22.4% in Q2 2023 to 15.7% in Q3 2024. Taking Canalys' report on PC shipments in mainland China for Q2 2024 as an example, Lenovo ranked first with 3.071 million units shipped in Q2 2024, holding a 34% market share, while HP, with 817,000 units, trailed behind Huawei, with only a 9% market share.

In this report, Huawei's market share surpassed HP's, and although Tongfang trailed closely behind with a 1% gap, its 86% year-over-year growth rate indicates strong development momentum.

In addition to the above brands, domestic brands such as Xiaomi, Mechrevo, and Honor have also launched high-performance laptops equipped with self-developed chips in recent years, attracting significant consumer attention with their powerful performance and reasonable pricing, demonstrating strong growth potential.

Among the domestic PC brands, Huawei and Xiaomi, primarily focused on the smartphone business, stand out. Leveraging their sales advantages in the smartphone and tablet markets, they have unique conditions for achieving seamless connectivity in office scenarios. In Huawei's HarmonyOS PC promotions, slogans like "breaking barriers" and "opening a full-scenario smart life" tend to attract more new middle-class and Gen Z consumers seeking novelty.

Although Huawei and Xiaomi's PC products currently face some skepticism regarding their software and hardware, it cannot be denied that new variables are attempting to reshape the domestic market landscape.

Another major reason for HP's decline in the Chinese market may be related to the decreasing trust in the brand.

Due to geopolitical factors, discussions about "decoupling" from U.S. tech companies have been ongoing in recent years. In August this year, HP was rumored to be seeking to move more than half of its personal computer (PC) production out of China, with Thailand as the primary destination.

Although HP denied this, its layoffs at its Taiwan branch and its decision to open an R&D center in Singapore have kept market speculation alive. This has led to a decline in brand trust, which, though difficult to quantify, may still become a stumbling block for its development in the Chinese market.

It can be said that time is running out for HP.

AI PCs: Unlikely to Be the Key to Breaking the Deadlock

With the increasing application of AI large models in tech products, AI has become a new economic growth point for manufacturers to compete over, and the same goes for the PC industry.

Compared to smartphones, PC manufacturers were relatively late to adopt AI.

In September 2023, Intel was the first to propose the concept of AI PCs and announced the launch of the industry's first AI PC acceleration program. In October of the same year, Lenovo showcased its AI PC products to the market and launched multiple new AI PC products in January this year, including the Lenovo Legion and Lenovo Xiaoxin series. In April this year, Lenovo further launched commercial AI PCs designed for government and enterprise clients—the Lenovo Zhaoyang AI PC.

Dell also launched the Inspiron 13 Pro equipped with Intel's AI PC processor in December last year; in February this year, it introduced commercial AI laptops and mobile workstations, including the Latitude AI PC series and Precision workstations.

In May this year, HP released products including the EliteBook high-end AI business laptop for large enterprise users, the Zhan series AI business laptop for small and medium-sized enterprise clients, and the ZBook mobile workstation and new Z-series AI all-in-one for computing users, officially entering the AI PC market competition.

Compared to Lenovo and Dell, HP's steps in deploying AI PCs were slightly slower. While the market expected it to make a late but strong comeback, it was discovered that its AI PC products did not bring the disruptive freshness expected compared to its peers.

In fact, while major manufacturers are 大肆宣扬 AI PCs as injecting new vitality into the industry, the market is not without 质疑之声: the technology 亮点不多、AI PC 功能消费者使用频率不高、成本问题等。

Similar to AI smartphones, the AI PCs pursued by HP and others offer more of a 锦上添花而非雪中送炭的功能. Even so, the competition for AI PCs among new and old players remains fierce, and HP 混迹其中， with not many 筹码 in hand.

For HP, layoffs are the inevitable 阵痛 of optimizing costs and strategic transformation, reflecting the performance anxiety of this veteran PC giant. But beyond personnel adjustments and 布局 AI PCs, it still needs to find new answers to the question of how to solve the problem of an elephant turning around.

As a behemoth, HP's transformation is no easy task, as 牵一发而动全身 means its reforms cannot be too rapid. Against the backdrop of industry upheaval, cautious exploration and continuous 微调 will be the norm. This also 注定 that finding a new growth engine will require a 持久战。