Hewlett-Packard Co.'s decision to cut payroll by as many as 33,300 more jobs is the latest reminder of the decline of a pillar of the U.S. computer industry and highlights Chief Executive Officer Meg Whitman's efforts to strengthen the company against nimbler rivals.
It was just seven years ago that Hewlett-Packard almost doubled its workforce with the acquisition Electronic Data Systems Corp. to about 320,000 employees, according to data compiled by Bloomberg. Today, its recipe for survival is to break in two, seeking to respond to competition by homing in on narrower product categories. One of the new businesses, Hewlett Packard Enterprise, will supply businesses with high-end technology, while HP Inc. will sell personal computers and printers.
Hewlett-Packard shares rose $1.36, or 5 percent, to close Wednesday at $28.47 in New York. The stock was down 32 percent this year through Tuesday.
Hewlett-Packard's revenue has dropped and its employee ranks have shrunk for the past three fiscal years as the consumer shift to mobile devices has damped demand for the company's laptop and desktop computers. Hewlett-Packard had 302,000 workers at the end of October 2014, down from a peak of about 350,000 in 2011.
Meanwhile, new companies such as Amazon.com Inc. have emerged and started delivering information-technology services over the Internet, luring business customers away from Hewlett-Packard's forte of packaged software and hardware. Hewlett-Packard's enterprise-services business alone, the focus of most of the cuts announced Tuesday, has lost about $4 billion in annual revenue since 2011, a situation that Whitman compared with water draining from a bathtub.
"A big step forward would be if enterprise services can stop shrinking," she said at a meeting with analysts. "Before you can grow you have to fill the bathtub up."
"HP absolutely needs to fix enterprise services, PCs and servers across both its companies," said Anand Srinivasan, an analyst at Bloomberg Intelligence. "Some of the issues are market related and some of them are HP-specific. The solution to revenue growth is not going to come from restructuring actions."
Hewlett-Packard will incur a charge of about $2.7 billion as part of the restructuring, the company said. It had previously disclosed $2 billion in probable cost cuts at the services division within Hewlett Packard Enterprise, and found an additional $700 million in savings across the business, said Tim Stonesifer, chief financial officer of Hewlett Packard Enterprise.
As many as 25,000 to 30,000 of the job cuts will take place in Hewlett Packard Enterprise. HP Inc. announced 3,300 workforce reductions over three years and $300 million in restructuring charges.
"Management reiterates that this will be the last restructuring it undertakes, but this one has been going on for several years," Srinivasan said.
Business on 09/17/2015