HP CEO Enrique Lores talks recession, layoffs, hybrid work, and PC demand
HP Inc. CEO Enrique Lores joins Yahoo Finance Live’s Brian Sozzi at the 2023 World Economic Forum in Davos, Switzerland to discuss reducing 12% of the company’s workforce, inflation, the risk of a recession, cost-cutting measures, and the outlook for growth.
Video Transcript
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BRIAN SOZZI: All right, welcome back to the World Economic Forum here in Davos, Switzerland. We spent the whole week talking to a lot of executives, and one of them was a friend of the show, HP CEO Enrique Lores. He's coming off a very tough decision of having to lay off 12% of his workforce. I asked him more about that and the state of his business.
ENRIQUE LORES: I think it's probably more positive than what we saw last May. Actually, I was telling the team, when we came in May, the US delegation was more optimistic than the European delegation. This time, it's probably the opposite, which tells about the different challenges that the different companies are seeing in the different geographies.
BRIAN SOZZI: Do you think we're just making too much about a potential recession this year? There are a bunch of surveys that have come out. PWC said most CEOs, 73% of them polled, were looking for a recession this year.
ENRIQUE LORES: I think it's hard to know what is going to happen. And clearly, I'm not an expert. What is true, though, is there are significant challenges when we look at the impact of inflation, the impact of the war, the increase of energy prices, the situation in China. Each of these things could drive for a recession. Hard to know what will happen. For all of us, what is important is to focus on those things that we can control. I think this is where we, as CEOs, can add value. And in our case, it's really about managing our cost while we continue to invest in the growth areas to position ourselves in the right way for whenever the economy will revamp.
BRIAN SOZZI: There are a lot of moving pieces to this year, absolutely. As you frame out the year, what is the biggest challenge you're up against?
ENRIQUE LORES: I think it's being able to do both. Because as I said, we need to reduce our cost structure to be more competitive. But also, we need to continue to invest in hybrid work. We need to continue to invest in gaming, in consumer services. And balancing that is the challenge we have. But we are optimistic that we will be able to do both and position the company for the future.
BRIAN SOZZI: Speaking of cost reduction, you've made a big move. You've made a big move to reduce 12% of your workforce. How hard is it to make a decision like that at this point in time?
ENRIQUE LORES: It is always very hard because anything that has people implications are probably the hardest decisions we have to make as executives. But at the same time, they are the right thing to do for the success of the company. And what we need to do is manage them in the right way for the employees while we execute them to-- for the future of the company.
BRIAN SOZZI: Those cost savings, how do you reinvest them in the business?
ENRIQUE LORES: We have identified five key growth areas. And what we have said is, some of the savings will go to the bottom line. Some will also be used to continue to accelerate the growth in those areas because this is where we see the future of the company. They represent now more than $11 billion, and we expect them to continue to grow in 2023.
BRIAN SOZZI: Do you think the cost cutting is done? You've gotten everything out of the way that you need to get out of the way?
ENRIQUE LORES: In a company like us, there are always opportunities to continue to reduce cost. When you have $60 billion of revenue, 50-plus billion dollars of cost, there are always opportunities to reduce cost, which is one of the things that we have been-- know how to identify that and execute on that.
BRIAN SOZZI: You've really started to pivot the company to a hybrid work environment, to support that environment. Take us through some of those initiatives.
ENRIQUE LORES: I think we-- first of all, we believe that the future of work is hybrid. We see the benefits for the company. We see the benefits for employees. And we see a lot of opportunities for innovation to make the right employee experience. If you think, for example, about the experience that the employees that are connecting to a virtual meeting are having when some of them are working from home, some are working from the office, clearly a lot of work to do to make sure that they feel integrated. They feel part of the meeting. They can see body language. They can be heard. That's an area where we are investing because we really see an opportunity to grow and differentiate.
BRIAN SOZZI: I can tell you're having fun right now. I'm just studying your body language. It looks like you're having fun. We're actually-- we're still really cold, guys. I am not making this up. It's freezing out here right now. Look, as we look into the back half of the year-- I talked to one well-known tech CEO. I can't say because it was off the record, but they said the PC correction may not end until next year. What do you see?
ENRIQUE LORES: Well, what we have said is that we expect the inventories to be fixed by the first half of '23. And this is a big part of what is driving the correction. And the rest is going to be really driven by what happens with demand, what happens with economy, what happens with the recovery. Hard to predict at this point. What we are doing is working with multiple scenarios, as we said in our last earnings call, to make sure that we identify the actions that we need to take, depending on what scenario we see happening.
BRIAN SOZZI: I was thinking back the other night. And when the pandemic first hit, I went to a Best Buy store, and I bought a lot of junk, things that I just needed right away, $30 webcam, you name it. Not good stuff. And now it's all broken and doesn't work. Do you see a major, I don't know, refreshing of all of these products over the next few years because they don't work? And to your point, we may still be working from home in some component.
ENRIQUE LORES: I do. And both the increase of number of PCs that were sold, but also cameras and displays, all of them represent an opportunity to be replaced. All of them will be replaced. We really think that people are going to continue to work in a hybrid way, which means sometimes working from home, sometimes working from the office, doing different things in the different locations. And clearly, this is a big opportunity for us.
BRIAN SOZZI: I'm talking to a lot of leaders, and they all seem to be using Davos also not only to meet with clients and drum up business, but rethinking how they lead as a leader. Have you had any just moments alone to yourself here thinking about how you may lead differently coming out the other side of this pandemic?
ENRIQUE LORES: For me, one of the big benefits of Davos is really listening and listening what others are doing, what others are thinking, what others are feeling, and use that to really redesign the plans for the company, but also for some-- a personal experience. So definitely yes. And I think this is one of the big values of the four days that we spend here in the cold.
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BRIAN SOZZI: Good life advice there from HP CEO Enrique Lores-- talk less and listen more.
