HP, Yahoo: Two IT Giants on the Ropes but Hardly Knocked Out

NEWS ANALYSIS: HP and Yahoo may be down for the count now and looking at huge layoffs, but that in no way indicates that they won't continue to be the IT giants they are.

Two long-established and respected IT companies appear to be, as they say in boxing, "on the ropes." Not the first time we've read something like this, and certainly not the last.

Hewlett-Packard, established in 1939, and Yahoo, born in 1994, are both at nadirs in their histories, looking at having to lay off large numbers of employees in efforts to keep their businesses looking financially decent for shareholders and customers.

eweek.logo.analysis1.jpg

Leadership is the main issue with both companies. Yahoo is searching for its seventh CEO since 2007 and already has told 2,000 of its 14,100 employees, or about 14 percent, they'll need to move on. HP is on its third CEO in two years and is now looking at laying off between 25,000 and 30,000 of its 349,600 employees, a reduction of about 8 percent of its workforce.

If HP does this, it will be one of the top 10 largest rounds of layoffs in the history of the IT business, according to outplacement firm Challenger Gray & Christmas.

Constantly Defending Themselves Against New Competition

Both companies are defending themselves against previously unheard-of global competition on all flanks. HP is being challenged in all the markets in which it see its future: servers, enterprise software, storage, networking, cloud computing goods and services, personal devices--even printers and ink, two of the company's steadiest businesses for years. Oh yes, ink is a huge HP income producer.

hp.logo.jpg

HP also has made some bonehead business decisions in the last decade--we won't go into them all at this time--that have cost the company a lot of money and have elicited doubt among its shareholders, potential investors, and business partners. Smarter leadership will prevent that from happening again.

The same can be said about Yahoo. Yahoo is in a slightly more precarious position, because it competes in fewer markets and because the software goods and services business moves at the speed of the Internet, unlike anything hardware. It has to fight off every Tom, Dick and Harry Web service startup that comes along, whereas many of HP's competitors at least have to have physical offices and warehouses.

yahoo-logo.jpg

All companies worth their salt go through cycles. General Motors, General Electric, Xerox, IBM--you name it. Yes, even Apple, currently the richest and most successful company in the world. Why, less than two decades ago that company, too, was on the ropes and just that close to being knocked completely off its pedestal.

Apple Nearly Acquired in 1996

If it hadn't been for an Apple lawyer in 1996 who called Sun CEO Ed Zander the night before an announcement was to be made that Sun was going to buy Apple for $6 per share (sold for $540 on May 18), the world would be quite different. The iPhone, iPad, iTunes and many other products we take for granted today quite likely wouldn't have developed the way they did under different management.

Chris Preimesberger

Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he has...