WEBVTT - HP CEO Enrique Lores Talks Earnings and Future

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Shairs of HP are down this morning after giving a

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<v Speaker 2>profit outlook that fell short of market expectations. The computer

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<v Speaker 2>maker citing the impact of rising component costs and tariffs

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<v Speaker 2>on goods from China. Joining us now is Enrique Lores

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<v Speaker 2>HP CEO, as well as here on the desk with

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<v Speaker 2>me co host of Bloomberg Technology Caroline Hyde. Enrique, let

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<v Speaker 2>me first ask you about these job cuts. You're gonna

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<v Speaker 2>cut two thousand workers or as many as two thousand

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<v Speaker 2>workers to save three hundred million dollars a year, must

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<v Speaker 2>be partially in response to these tariffs. Right, where are

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<v Speaker 2>those jobs going to be lost?

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<v Speaker 3>Well, first of all, thank you, thank you for having

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<v Speaker 3>me here. This is part of the restructuring program that

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<v Speaker 3>we started with the company almost three years ago, and

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<v Speaker 3>we have been very selective and very strategical. Where to

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<v Speaker 3>make these cuts is not only cats. We are more

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<v Speaker 3>doing rebalancing of because at the same time we're investing

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<v Speaker 3>in other areas. But that's really a part of our

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<v Speaker 3>long term plan that we have put in place, and

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<v Speaker 3>really we are now about to finish that at the

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<v Speaker 3>end of the year.

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<v Speaker 2>But where where are those jobs? Are American job's going

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<v Speaker 2>to be lost here in Regain.

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<v Speaker 3>I think it's all over the company. We have been

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<v Speaker 3>identifying areas where we needed to be more precise, and

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<v Speaker 3>we haven't shared externally the specifics or where this will happen,

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<v Speaker 3>but I can tell you is one of the decisions

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<v Speaker 3>we make with more care because we know that relevance

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<v Speaker 3>this has for our employees.

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<v Speaker 1>Okay, we know that you were looking at stripping out costs.

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<v Speaker 1>When it comes to that stripping out of costs, is

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<v Speaker 1>it as Mattin implies in reaction to also the component

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<v Speaker 1>costs that are going up the China tariffs as you speak,

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<v Speaker 1>as we've been speaking about on the Nning School, for example.

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<v Speaker 3>I think it's a combination of multiple factors. When we

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<v Speaker 3>look at the short term, clearly component costs and tariffs

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<v Speaker 3>are going to be having an increase. But also this

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<v Speaker 3>is part of the effort to make the company more

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<v Speaker 3>competitive in the long term and to be able to

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<v Speaker 3>invest in the areas where we see long term growth

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<v Speaker 3>we have. We are positioning the company to lead in

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<v Speaker 3>what we call the future of work, and this requires

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<v Speaker 3>incremental investments in areas like AI, in areas to customer experience,

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<v Speaker 3>and this has been driving these savings allow us to

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<v Speaker 3>also invest in the areas of growth for the future.

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<v Speaker 1>But how quickly is the AIPC, for example, really coming

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<v Speaker 1>on tap and driving demand. I know there's good growth

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<v Speaker 1>twenty five percent, but it's from a standing start. So ultimately,

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<v Speaker 1>when do you think the percentage of aipcs will match

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<v Speaker 1>what's already being shifted to the market.

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<v Speaker 3>For example, our current expectation is that by the end

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<v Speaker 3>of this year, aipcs will represent more than twenty five

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<v Speaker 3>percent of all PC shipments. So it's really growing very fast.

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<v Speaker 3>As you said, market wise, quarter over quarter we saw

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<v Speaker 3>growth of twenty five percent, So they are starting to

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<v Speaker 3>be a relevant part of our portfolio and a relevant

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<v Speaker 3>part of the mix. And this is because of the

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<v Speaker 3>incremental value that they bring. When customers use that, they

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<v Speaker 3>can experience AI at the edge, which means it is

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<v Speaker 3>lower cost, it is cheaper, it is faster than doing

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<v Speaker 3>it in the cloud, and it's also more secure because

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<v Speaker 3>you can use your local data, you don't need to

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<v Speaker 3>bring the data to the cloud, and you can manage

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<v Speaker 3>everything locally.

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<v Speaker 2>So part of the reason that the Trump administration is

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<v Speaker 2>putting on these tariffs is to bring production back to

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<v Speaker 2>the US. And obviously there's not a lot of computer

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<v Speaker 2>final assembly in this country or our printers for that matter.

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<v Speaker 2>Are you reacting at all to this by moving production

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<v Speaker 2>to the US.

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<v Speaker 3>What we have learned during the last three years is

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<v Speaker 3>that we always need to be looking at different scenarios

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<v Speaker 3>of how to evolve our supply chain, and this is

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<v Speaker 3>what we have done in the last two years. Moving

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<v Speaker 3>manufacturing into the E is one of the scenarios that

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<v Speaker 3>we are contemplating. We haven't made any decisions yet.

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<v Speaker 1>How expensive would that make components? Though, Enrique, are we

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<v Speaker 1>going to see pressure on component prices and your ultimate

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<v Speaker 1>bottom line continue if you're having to shift the manufacturer

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<v Speaker 1>closer to the US.

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<v Speaker 3>I think one of the challenges of bringing manufacturing back

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<v Speaker 3>to the US is what you just said is not

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<v Speaker 3>only the assembly that we will be doing. Is what

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<v Speaker 3>will it take to bring all the different components, all

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<v Speaker 3>the different suppliers that we have and have the manufacturer here.

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<v Speaker 3>And this is going to be a much longer process,

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<v Speaker 3>and it's part of the evaluation that we are doing.

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<v Speaker 1>Is it much incentive for you to do so? Other

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<v Speaker 1>than political pressure? Are getting enough carrot rather than just

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<v Speaker 1>stick coming from the federal government.

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<v Speaker 3>I think there are different reasons to make our subbly

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<v Speaker 3>chain food prim more flexible, and this is what we

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<v Speaker 3>have been doing over the last years. One is requirements

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<v Speaker 3>from different governments, and different governments have put in place

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<v Speaker 3>different requirements. Also, another incentive is logistics cost. It will

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<v Speaker 3>be of course cheaper to produce products closer to where

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<v Speaker 3>customers are and also provides more flexibility and in terms

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<v Speaker 3>of time for response to customer demand. So there are

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<v Speaker 3>some benefits of building products locally and this is one

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<v Speaker 3>of the reasons that where we have gone from a

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<v Speaker 3>very centralized model that we had a few years ago

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<v Speaker 3>to a more decentralized model that we have now.

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<v Speaker 2>Riquet, how is the brand progressing? You know, somebody of

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<v Speaker 2>my age knows the name Hewlett Packard, but not the

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<v Speaker 2>simple two letter acronym HP. You have obviously a real

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<v Speaker 2>opportunity to make a change there as the kids start

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<v Speaker 2>using computers more for AI or as AI starts to

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<v Speaker 2>drive sales. So how is pushing this brand in your

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<v Speaker 2>growth as simply HP progressing?

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<v Speaker 3>We think that the brand is one of the key

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<v Speaker 3>acts that we have in the company and during the

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<v Speaker 3>last twenty four months, we have significantly increased the investment

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<v Speaker 3>that we do in the brand and we for example

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<v Speaker 3>have signed some global sponsorships with keysport teams to be

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<v Speaker 3>able to really make the brand more visible. And this,

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<v Speaker 3>for example why we sign an agreement with Ferrari to

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<v Speaker 3>be the title sponsor of Ferrari last year. Additionally, to

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<v Speaker 3>bring kids. This is one of the to the brand

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<v Speaker 3>and to the company. This is one of the areas

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<v Speaker 3>where our gaming business is relevant. We are one of

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<v Speaker 3>the key gaming suppliers in the world, and by having

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<v Speaker 3>a strong presence in gaming, we can attract kids and

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<v Speaker 3>young people to the brand.

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<v Speaker 1>You're talking math's language when you bring up Ferrari and

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<v Speaker 1>video games. I'm video caase that that matter, Enriquey. Going

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<v Speaker 1>into the weeds there a bit on the tech side

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<v Speaker 1>of things. You made a really interesting purchase recently of Humane.

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<v Speaker 1>It was a much hyped Generator AI hardware and software

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<v Speaker 1>company ex Apple founders. They sold to you the talent,

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<v Speaker 1>the tech, but not actually the hardware pen I'm interested

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<v Speaker 1>in You're not thinking about Generative AIS a hardware piece

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<v Speaker 1>in that respect, how does it help your business?

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<v Speaker 3>We think that the acquisition of Humane has been a

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<v Speaker 3>very smart mood for us. We are getting a very

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<v Speaker 3>talented team and we are getting key software technology that

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<v Speaker 3>we can integrate in the rest of the portfolio. One

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<v Speaker 3>of the key strategies of the company is really about

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<v Speaker 3>integrating AI into all of our products so customers can

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<v Speaker 3>experience AI ad ed and Humane has key technologies that

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<v Speaker 3>will allow us to accelerate that development. So it's really

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<v Speaker 3>a big part of where we are taking the company

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<v Speaker 3>and we're very pleased having been able to do that.

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<v Speaker 2>Enrique really appreciate the time today. And Ricky Loris there

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<v Speaker 2>is the CEO of HP and of course thank you

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<v Speaker 2>as well to Caroline Height of Bloomberg Tech and no

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<v Speaker 2>really pret please.

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<v Speaker 1>Bring us more when they mentioned Ferrari.

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<v Speaker 2>To exactly, I mean, Ferrari is really a tech company, right,

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<v Speaker 2>and each of their suspension pieces on the new SUV

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<v Speaker 2>are like supercomputers in themselves and on.

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<v Speaker 1>We seeing the pressure on the computer on wheels that

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<v Speaker 1>is Tesla at the moment, and just ultimately all of

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<v Speaker 1>these business Whenever you go to the mobile world congresses

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<v Speaker 1>of the world and the big tech conferences, it always

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<v Speaker 1>basically be about autos about to go there just as

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<v Speaker 1>a little shout out, But in general it has been

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<v Speaker 1>all about the autos, all about the intersection of car.

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<v Speaker 1>And it's so interesting when you speak to Mark Gumman,

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<v Speaker 1>just really saying the biggest loss that Apple ever made

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<v Speaker 1>was not doing the car anymore.

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<v Speaker 4>Same story, right, car play is so ubiquitous, but car

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<v Speaker 4>plays at threat in some ways.

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<v Speaker 2>Yes, No, that I think was the most interesting thing

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<v Speaker 2>I learned last week of anything.

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<v Speaker 1>But I also loved how you tried to push him on,

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<v Speaker 1>like where are these job cucks happening? How are they happening?

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<v Speaker 1>Because this is something we've got to focus on. When

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<v Speaker 1>you got Autodeskla software company today also announcing thirteen hundred

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<v Speaker 1>jobs going you got almost two thousand coming from HP.

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<v Speaker 1>This is a drip drip, drip effect. We are not

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<v Speaker 1>seeing the jobs being added that maybe we thought with technology,

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<v Speaker 1>data centers don't employ that many people.

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<v Speaker 4>And to the point that you've been making here so

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<v Speaker 4>many different job cuts for different reasons around the world

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<v Speaker 4>and in the United States. Remember Meta also announced some

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<v Speaker 4>drob cuts as well. Caroly And we have to leave

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<v Speaker 4>it there.

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<v Speaker 1>We thank you.

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<v Speaker 4>You're a real hero to the whole network this week