HP to Lay Off 27,000 Employees

Hewlett Packard’s 2nd quarter earnings call last May brought with it a lot of distressing news, chief among which is news that the company will be cutting 27,000 jobs, which basically amounts to 8% of their total workforce. The layoffs will happen within the next couple of years amidst slumping profits. It’s not all gloom and doom, though, as the company also announced a slight increase in their earnings per share, with their previous $0.91 EPS managing to reach $0.98.

Unfortunately, the slight increase in earnings per share is not enough as it is still hovering around HP’s book value, and any significant further slide will result in the shareholders realizing that it would be better if the company was sold for its parts.

The earnings call was a rollercoaster ride, as it includes items that are positive interspersed with ones that are liable to give shareholders a collective heart attack. For instance, HP’s printing and imaging group posted revenue that had a sharp 10% decline from the year-earlier quarter. Their PC unit, on the other hand, managed to rise a little bit at 0.4%. It’s not completely HP’s fault, though, as other imaging companies are also experiencing a downward slide, with HP simply failing to make highly unique products. One glimmer of hope comes from HP’s healthy relationship with Microsoft, which means they could get a little bit of market boost once Microsoft finally gets their act together and releases Windows 8.

HP’s CEO Meg Whitman emphasized during the earnings call that HP’s saving grace these days are cloud, security, and information management. The increased interest in analytics and big data as well as the newfound popularity of cloud computing and security bodes well for the company, although the topic only got a passing mention during the earnings call.

Another piece of somber news concerns Autonomy, which is a crucial piece of HP’s information management pillar, and was acquired last year for $11.7 billion. According to the earnings call, Autonomy is currently struggling, to the point that HP is now in the process of replacing its founding management with HP insiders. HP’s cloud ventures are all fresh off beta, so there are no financials on their performance. Whitman did not discuss any of the products included in HP’s security portfolio.

According to HP, there are restructuring plans in the process being implemented, with the aim of generating annual cost savings amounting to $3 billion and $3.5 billion. It is estimated that the financial benefits will be felt by 2014, and then reinvested back into the company’s other projects, such as cloud, information management, and security businesses.

One thing that we can get out of the earnings call is that HP continues to have problems with their identity. The company’s desire to be a key player in the cloud, big data, and security seems to be inadequate and a bit lackadaisical than what the industry expects.

Whitman’s message may be consistent, but her message’s consistency is probably being mistaken by the investors as boring and uninspired. It seems that a little bit of guidance on the company’s long term vision would do wonders when it comes to reassuring and placating customers and investors alike.

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