Hewlett-Packard plans huge layoffs
Chief Meg Whitman needs to present a clear plan to right the company's course, as job cuts will not be enough.
Hewlett-Packard (HPQ) chief executive Meg Whitman, who was hired last year to clean up the mess left by her predecessor Leo Apotheker, reportedly is considering slashing as many as 30,000 jobs, or about 9% of the company's staff.
About 15,000 cuts will be in HP's struggling enterprise services division, though other divisions will not be spared, according to Bloomberg News. Unfortunately, more job cuts are likely.
According to Reuters, each HP employee generates about $357,491 in revenue and $16,982 in net income, well below the industry averages of $8.18 million and $164,858. HP employs about 349,600 people.
Shares have slumped more than 14% this year as investors have worried that the pioneering tech company had failed to keep up with the latest trends, such as tablet computers and the shift toward cloud computing, according to Bloomberg. The company's PC sales are dropping.
The leaking of the the layoff announcement may have been timed to coincide with the much-hyped Facebook (FB) initial public offering. Since the media have the attention span of a gnat, the timing could minimize coverage of the layoffs. But that's a short-term strategy. Eventually, investors are going to expect Whitman to deliver results.
Bloomberg quotes an analyst as saying that HP could save about $1.2 billion by cutting 18,000 jobs. The question that then arises is what the company should do with that windfall. Maybe it will increase its dividend or invest in its business, but figuring out where may be tricky, because most of its units are foundering.
The Personal Systems Group's revenue declined 15% last quarter as demand for desktop and notebook computers plunged. Revenue of the imaging and printing business declined by 7% during the same time, while enterprise servers, storage and networking revenue fell 10%.
Software was a bright spot, reporting a 30% gain in sales. However, those figures include the acquisition of Autonomy. Software also is much smaller than the other businesses, so HP would have to make a huge acquisition there for it to make a difference to its bottom line.
Indeed, it took HP years to morph from a tech innovator to a hot mess. Whitman, though, does not have that much time to right HP's faltering ship. One of her biggest challenges remains figuring out what to do with the PC business, which Apotheker wanted to ditch but she decided to keep. Unfortunately, there is only so much cutting to do.
Whitman, eventually, will have to figure out how to grow HP. Until she articulates a coherent plan to do that, investors should avoid the stock.
Jonathan Berr does not own shares of the companies listed here. Follow him on Twitter@jdberr
What I don't understand is how these companies "save and have all of this money" merely by layoffs. Don't the employees actually add to production, such that when they are laid off, there is a loss in production and revnue.
Doesn't their labor produce a net gain for the company, or at least a break even.
EDS survived the better part of a decade doing nothing more than "Benefits Harvesting" via the tenured benefits of the employees they acquired during buyout after buyout in the IT services industry. Offshore workers were shoved into every group because it was what every other company was doing, "you WILL have this percentage of offshore heads" yet the first 6 we tried to hire laughed at the maximum salary we tried to offer, the next 3 dozen or so went through the 6 weeks of language and IT training then took the offer to IBM where they gave them the offer plus 10%. What we wound up with were just heads on the books, just one more layer to go trough to get something done, so what once took a week pre EDS/HP now took SIX WEEKS, I $h!t you not. They have no mechanism to take advantage of the ideas or products they acquire, if it doesn't fit into man hours or assets that can be cut there are no calculations for it so it simply does not exist.
Since my chute was deployed I've purchased 3 HP printing devices, each a better investment than its predecessor, the last one I was AMAZED at how easy it was to securely attache it to my network and start using it. I've purchased ONE HP notebook, a flagship top of the line notebook, the most money I've spent on a personal computer, ever! The first attempt had a blown pixel, the second had a heat sink fall off the CPU which caused thermal shutdowns, the final version of it had so many intermittent problems I gave up on trying to utilize what they refer to as a support department.
I'm typing this on an ASUS notebook.
Saving money isn't going to do them good. Their computers and laptops suck, and until they start figuring out what to do to solve these problem in their company, maybe then they'll be able to survive. Until then, more and more people are going to realize just how shitty their products are and move to higher quality products. HP is way behind. I've had 2 laptops from HP, very well taken care of and they just all of the sudden dont turn on properly anymore, eventually not turning on at all. I dont mean to sound like an A$$, but they deserve to go down.
Reminds me of another candidate running for office in 2012. Is this the kind of fix he has in mind for the US economy? And how would that work? (We don't know because past campaign experience has taught him it's better not to release too many details.)
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