HP Indigo’s long-serving general manager Alon Bar-Shany, who suddenly announced this week he’d be leaving the company after 25 years, had been opposed to a plan by HP management to fire hundreds of Israeli workers, according to an report by Israeli tech news site CTech.
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| 'Widescale cutbacks are unjust': HP Indigo GM Alon Bar-Shany (WhatTheyThink video) |
“HP, which purchased Indigo in 2001 and made it one of the corporation's divisions, is seeking to fire hundreds of employees in Israel, according to one person familiar with the matter who spoke to [business website] Calcalist on condition of anonymity,” said the report by CTech’s Golan Hazani.
“Bar-Shany was opposed to the widescale layoffs and his resignation is expected to remove the main barrier that was preventing the parent company from getting its wish.
“Over the past couple of years, Bar-Shany deflected two separate attempts by HP to downsize Indigo's workforce,” the report said. “The pressure grew this past October with the appointment of Enrique Lores as president and CEO of HP. Lores announced a reorganization plan that will begin in 2020 and end in 2022 and which will include cutting the company's workforce by 7,000-9,000 employees, or up to 16% of the 55,000 people working for HP around the world.
“Indigo employs some 2,800 people in Israel and another 1,000 worldwide. HP estimated that the reorganization plan would cost it around $1 billion, but said the move would already save the company the same amount in expenses by 2022. Even though thousands of workers have already been fired by the company across the world, Indigo and Israel have been spared to date.”
Indigo's development and production operation is based at its factory in Kiryat Gat
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Enrique Lores, president & CEO, HP
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HP and Lores had been in a dispute with Bar-Shany regarding the extent of the layoffs required in Israel, acording to the report.
“HP demanded that hundreds of workers would be let go while Bar-Shany only agreed to several dozen. Indigo's income is estimated to be in the region $1.7 billion and the company is believed to be profitable. As such, Bar-Shany felt that widescale cutbacks are unjust.”
Bar-Shany will be replaced by Haim Levit, who’s held senior positions at the company for 15 years. “With Levit’s background being in management rather than research and development, it is believed that HP will begin rolling out its cutback plan in Israel in the coming weeks,” the report said.
“The reason for the restructuring is believed to be the stagnation in the company's sales, which are currently in the region of $59 billion a year. HP said that it would make changes to its printer division in order to provide more services and that it would increase the price of its printers that can work with off-brand ink cartridges in order to increase its profits from the sale of hardware.”
HP did not announce Bar-Shany's departure and the news was revealed by Calcalist following a management meeting. “It is unclear whether he indeed left on his own volition or was essentially fired," it said.
Commentary by Andy McCourt
A lot of people worldwide are losing their jobs right now but Alon Bar-Shany did not want to be the one who wielded HP's sword to the HP Indigo employees that have been his family for 25 years. In fact, there is probably no justification for it as HP Indigo's prospects are very good as Covid restrictions ease. The problem is that Enrique Lores is lumping the entire print division into one and saying 'Indigo has to take the pain too.' The dip in printer-centric profit has been seized upon to slash at Indigo but most of the dip has come from office and desktop-type printers reliant on ink, toner and managed print contract income. As Marketwatch put it:
"In the fiscal second quarter, HP said that its pre-tax profits in printing were $548 million, down nearly 35% from $839 million in the year-ago quarter. Pre-tax profits for PCs, however, were up 43% to $552 million, from $385 million in the year-ago period.
Printing revenue also saw a steep drop, tumbling 19% to $4.1 billion, compared to a 7% decline in revenue for personal systems, to $8.3 billion. Notebook sales were flat while PCs and workstations, used in the office, both fell by double digits. HP said it did see strong demand in consumer printing and supplies, as consumers went into lockdown around the world, but it was not able to fulfill all of its orders because of manufacturing disruptions."
From this it is clear that, even in Covid times, printing is still far more profitable than PCs, from a lower revenue base but printing is more affected by Covid because it's made from atoms and molecules, not bytes! Half of HP's profits from $4.1 billion in sales versus half of its profits from $8.3 billion! Think about what must be the best business model?
So, despite a 35% drop in revenues from print; it still managed to return profits just about on par with PCs - about half of HP's profits. Increased profits from the PC division are understandable given that people have been working from home and using Zoom and facebook to connect but, when social distancing regulations are relaxed, print will bounce back as it always does.
Investors like to see companies slashing workforces - it drives the stock price up - but the long-term view is rarely considered in the world of quarterly balance sheets. Long-term looks good for HP Indigo as it announced six new products last month - most with a focus on packaging print which is a good growth area Covid or no Covid. They are sitting on over USD$100 million in orders from ePac for example - the on-demand flexible pouch and packaging making company expanding all over the world. Indigo's dominance of the digital label market is under attack by inkjet but still accounts for over 50% of the digital label presses sold worldwide.
As a stand-alone company with about $2 billion in revenues, Indigo could still, grow, keep its workforce and prosper but it seems HP is determined to lump it all in with 'Printing' and tarnish it with it's own follies in the desktop printer, MFP and managed office print environment. The policy of 'charge more for hardware so we can sell more ink' beggars belief.
Inside HP, I suspect there is a culture that believes PageWide technologies will outdo Indigo in the long run - pure directly-applied inkjet as opposed to liquid toner electrophotography. Even Indigo's founder Benny Landa has acknowledged the best way to print with inkjet is to apply it to a carrier 'imaging plate' and transfer it to the substrate. PageWide is very good and has some great applications but at the high-end of digital printing, the offset print world has mostly voted Indigo for digital because of the quality and offset-like feel.
It's a vexed situation - as it is for most businesses during this time. HP needs to be seen to pleasing Wall Street while HP Indigo in Israel feels an obligation to protect the fantastic technology, jobs and factory that has given professional printing new life since 1993.
I can only salute Bar-Shany's stand on ethical values and loyalty, and wish him well.
