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.

By Jonathan Berr May 18, 2012 10:42AM

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

Tags: HPQ
20Comments
May 18, 2012 1:09PM
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I don't know that I would call puting 18,000 people out of work a "Windfall"
May 18, 2012 12:59PM
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It is the same old story: "corporate greed", but most companies...BestBye, Target,etc are in denial...claiming a weak economy (it is.) I own my own pc service & I thrive the old fashioned way: reasonable prices/good service to all my customers. Poor leadership,moronic corporate decisions, promotions via who you know not what you know, price gouging your customers = Ultimate Electronics, Circuit City,soon to be BestBye, Kmart is a matter of time,etc. I love using BestBye as my "prime" example of a blueprint for failure. I am a fan of HP printers, etc..good stuff. Of course, the demand for desktops & notebooks have dropped;due to the fact no matter what you buy its obsolete/worthless in approx. 3 months because of rapid technological advances. Ppl are keeping their "old" pcs, whence my successful pc service. Some of you know who I am real life, so when you end up "jobless" you can wash my car or mow my acreage. I will require you to fill out a tracking sheet LOL! Have a great day!!
May 18, 2012 11:13AM
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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.   

May 18, 2012 1:17PM
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Not to worry, when the BLS gets through with 30, 000 laid off, it will drop the UE rate another percent or two.
May 18, 2012 12:45PM
May 19, 2012 10:50AM
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I worked at EDS, I worked at HP, reminded me of a dichotomy of Survivor episodes, everyone sitting around or running in circles, plotting against each other, but not quite sure what to do, yet doing their worst to ensure no one is performing any better than they, else they could be the next sacrifice.

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.

May 18, 2012 4:30PM
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Here is a thought for HP. Take those job cuts and turn them into production spots and manufacture their product in the the U.S. Thenget rid of the Bangladesh help line and put English speaking people at the other end of the phone. Last, but not least, produce a product that actually works past the warranty period!
May 18, 2012 3:22PM
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ehh 50 percent of the company is printing sales, so pc business is important but not the breadwinner.  so just because you dislike the laptops doesn't make the company dead
May 18, 2012 4:14PM
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Here they go again. Meg is no different than Carly. Hp employees should go out and look for new jobs that aren't there.
May 18, 2012 4:26PM
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Reminds me of the two cows economics:
"You have two cows. You sell one, and force the other to produce the milk of four cows. Later, you hire a consultant to analyse why the cow has dropped dead."

I do not know about HP but it certainly feels like that to many in the corporate world. 
May 18, 2012 3:44PM
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Since she came in to clear up mess what might her incredible salary be or is she taking a cut?
May 18, 2012 3:04PM
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these cuts are a good thing Hp has too many employees and needs to save money, Whitman knows what she is doing, and Hp should be good in 1-2 years time.  the printing and software will always be a big thing from them.  everyone needs ink and Hp has enough cash to keep her afloat.  the recent dividend proves Hp is going to improve in time, they just need to take a direction in something and excel at it.  Hp has huge numbers and growth slowed due to apple , ibm, and dell, but HP is still known and used by lots of people.  if cuts in price and employees they can rebound.  Whitman isn't dumb she is an aggressive CEO and has the fire to fire, whatever it takes to take HP back.    reducing the workforce will turn around the company and make it efficient. 
May 18, 2012 12:14PM
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Huh. Now if Ms. Whitman had beat Jerry Brown in 2010, would HP being doing better or worse now?
May 18, 2012 4:09PM
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this company is so unproductive  and out of touch with what future demand the market will be generating in the future reminds me of Nokia lots of market share wasted by no understanding and insight into future trends in thier sector
May 18, 2012 3:18PM
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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.

May 18, 2012 11:22AM
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Move more business to China, they need the work, that 1.8 Billion savings figures out to about 100k per year per employe
May 18, 2012 11:59AM
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Know HP well.  Have a huge place here and there are many that think they they are "underwater" in more ways than one.  The same might be said for Micron.  They have always been a 'house of cards'  in waiting.  So, what is 25K or 40K jobs here and there in States .... really nothing so it seems with the 'markets'.  China is our friend! 
May 18, 2012 2:20PM
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It will make not make one bit of a difference.  Just enjoy the 'ride' and that is already 'planned' .. Have fun with this as it only going to get much better. 
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