HP to Cut Another 15,000 Jobs as Turnaround Continues

By Jeffrey Burt  |  Posted 2014-05-22
HP layoffs

HP to Cut Another 15,000 Jobs as Turnaround Continues

Hewlett-Packard's workforce will take another hit as the tech giant continues on its multiyear turnaround effort.

In talking about the company's latest quarterly financial numbers May 22, CEO Meg Whitman said HP will shed another 11,000 to 16,000 jobs on top of the 34,000 layoffs already announced. By the end of the year, HP will have cut as many as 50,000 jobs, or about 15 percent of its workforce of more than 300,000, since 2012, when the turnaround program began.

The new job cuts, which will be done between now and October, will save the company about $1 billion, according to HP officials.

During a conference call with analysts and journalists, Whitman said she expects this will be the final round of layoffs, and that the new job cuts did not indicate disappointment in the progress of HP's plans, but were more a natural progression for a company that has seen some significant transitions and acquisitions over the past decade.

"This actually has nothing to do with our confidence in the business," Whitman said in response to a question from an analyst. "This has to do with really understanding the opportunities that we have to make this company better. You’ve got to remember, this company was built over many years by acquisition, has five major business units, we sell through 150,000 [value-added resellers], we operate in 166 countries. As you look at our processes, as you look at how we go to market, as you look at things like sales reps and marketing and … e-commerce, there are so many opportunities to improve this company."

The CEO noted the acquisitions of such major tech players as Compaq and EDS Systems, as well as almost two dozen software companies.

"I would just say that this company had been through a lot … of change," she said. "Part of what we are doing is we are integrating, we are streamlining, we’re putting in new ERP programs, we’re investing in systems and technology to automate processes that frankly had not been in a while. So I actually think this is good news that we are continuing to take advantage of the opportunities that we see. But what I will tell you is I don’t anticipate an additional program after this."

The news of the layoffs came on a day when HP accidentally released its earnings statement early, before the markets closed, and then unveiled financial numbers that disappointed some industry observers. Revenue for the quarter hit $27.3 billion, a 1 percent drop from the same period last year, with net income of $1.3 billion, about a 1 percent increase.

While some analysts were hoping for better numbers, Whitman said she was encouraged by how HP was doing. Revenues have been relatively flat over the past few quarters, which is better than the steep declines in previous periods.

"I am feeling more confident because we have seen a stabilization of revenue, the very high single digit declines are over," she said. "We’ve had three quarters of pretty good stabilization. And I really like our product roadmap."

HP to Cut Another 15,000 Jobs as Turnaround Continues

HP's business groups saw a mix of revenue gains and declines. While revenues fell in the printing (4 percent), enterprise services (7 percent) and the enterprise business (2 percent), they grew in PCs (7 percent) and stayed flat in software. Both desktop and notebook PCs saw revenue increases of about 6 percent.

Whitman echoed comments by the heads of other vendors, such as Intel and Advanced Micro Devices, saying that the global PC market appears to be stabilizing after a couple of years of sales declines. She agreed that Microsoft ending support for the aged Windows XP operating system helped drive sales of new PCs.

"We actually think that migration is going to extend for some period of time, maybe another 12 months to 18 months," Whitman said. "But we also see some momentum in what I would call a long overdue PC refresh and, frankly, the fact that companies are realizing there is a need for a productivity tool that’s different than just a tablet."

Jack Narcotta, an analyst with Technology Business Research, said in a research note that the quarterly numbers—particularly for the PC and server businesses—were encouraging and indicated that the turnaround under Whitman was working.

"HP continues to emphasize solutions over individual products, as solutions offer more opportunities for HP to deepen its engagement with consumers, commercial entities and channel partners," Narcotta wrote. "Additionally, amplifying the value of a proven end-to-end services platform is a compelling differentiator against Lenovo’s limited set of PC and professional service capabilities and Dell’s challenging evolution as a private company."

However, the company still is trying to find a "compelling message that fosters deeper enterprise customer engagement segments beyond x86 servers and storage," which means HP will continue to see year-to-year revenue declines of 3 percent to 5 percent through 2015 "as customers scale back purchases and gauge HP’s transformation progress."

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