HP Plans 16,000 More Layoffs

EE Times – by Rick Merritt

SAN JOSE, Calif. — Hewlett-Packard will lay off another 16,000 workers on top of 34,000 layoffs it already announced. The move could save up to an additional billion dollars a year by 2016 on top of the maximum $4 billion savings previously anticipated.

The layoffs will come across all HP’s product divisions and geographical locations. About 7,000 of the new layoffs will come before the end of HP’s 2014 fiscal year and the rest before the end of 2015.  

On a quarterly earnings call, HP chief executive Meg Whitman took a hammering from Wall Street analysts, clearly surprised by the magnitude of the numbers. Whitman announced her turnaround plan in May 2012 estimating layoffs of 27,000. The numbers were later boosted to 29,000, then 34,000 and now are estimated at a total 50,000

Analysts asked if Whitman had lost confidence in HP’s ability to grow revenues.

“This has nothing to do with our confidence in business, it’s about opportunities to make this company better,” Whitman said. “I’ve done a number of turnarounds — not at this scale — but you see more opportunities the deeper you get in,” she said.

Executives have been studying additional opportunities to streamline the company since last year, signaling along the way more layoffs could come, added HP’s CFO.

Whitman noted HP has had three quarters of flat revenues after several quarters of revenue declines of 6& to 9%. “That’s encouraging to me because you have to stabilize before you grow,” she said.

Although HP’s divisions might have their own layoff plans to deal with specific business issues in the future, “I do not anticipate another [corporate restructuring] program after this,” Whitman said.

Several analysts on the call asked about the layoffs. Although Whitman seemed slightly off balance at the first question, which took an unusually challenging tone, she quickly regained her footing and provided increasingly confident answers, including the following:

 

• This company has been through a lot — the acquisitions of Compaq and EDS, the acquisitions of 11 to 20 software companies. Part of what we are doing is integrating, streamlining the system, automating processes which have not been done in a while

 

• No company likes to decrease the workforce. I think our employees live it every single day. Our employees know we can be more efficient. They are our biggest sources of ideas.

 

• I don’t think anyone likes this, but I think we’ve done a good job of explaining where we are at.

 

• My outlook has actually not changed in where we are at in our turnaround and our return trajectory. I’m feeling more confident because we have seen a stabilization of revenues and I really like our product road maps.

 

• Many people said this is the best product line up we have had in a decade. We need to run this co more efficiently in terms of ease of doing business and being faster, nimbler in decision making.

In its second quarter, HP reported GAAP net revenues of $27.3 billion up 1% from the same period last year. Profits were up 18% to $1.3 billion.

Across its major business groups, HP reported:

• Personal Systems revenue was up 7% year-over-year with a 3.5% operating margin. Total units were up 10% with desktops units up 6% and notebooks units up 6%.
• Printing revenue was down 4% year-over-year with a 19.5% operating margin. Total hardware units were up 1%.
• Enterprise Group revenue was down 2% year-over-year with a 14.4% operating margin.
• X86 servers revenue was up 1%, storage revenue was down 6%, Itanium server revenue was down 14% and networking revenue was up 6%.
• Enterprise Services revenue was down 7% year-over-year with a 2.5% operating margin.
• Software revenue was flat year-over-year with a 19.2% operating margin.

— Rick Merritt, Silicon Valley Bureau Chief, EE Times 

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