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donderdag, mei 24, 2012

HP Cuts 27K Employees, Looks to Cloud and Data Analytics for Growth

Meg Whitman, CEO Hewlett Packard is building a leaner, more focused company. Photo: ChinaFotoPress/ChinaFotoPress via Getty Images

Hewlett Packard CEO Meg Whitman announced the layoff of 27,000 employees Wednesday, or 8 percent of the company?s workforce. The painful move is part of Whitman?s strategy to refocus the hardware and software giant to take advantage of what Whitman describes as, ?some of the biggest shifts in technology that I have seen in my career.? Those shifts include data analytics, security and cloud-based software and services.

Layoff notifications to employees ?will got out shortly,? says HP CFO Cathie Lesjak, and will be completed by October, 2014, the end of HP?s fiscal year. Some portion of the layoffs will be handled through early retirement packages. HP expects to realize an annual savings of between $3 and $3.5 billion from the layoffs and attendant reductions in infrastructure once the cuts are complete. The layoffs announced Wednesday are the largest from a payroll perspective in the 73-year history of the company. Whitman took over as CEO of HP last September after a failed bid to become governor of California.

Facing drooping profits and a world more enamored of smartphones and tablets, than HP?s bread and butter?PCs and printers?Whitman and her team went through every business unit in advance of the cuts, she says. Rather than make equal reductions across the board, they were selective. ?We said, what do we want to focus on, how many people do we need to deliver it, and what pieces do we want to deliver??
One part of the HP business that faces deep cuts is its services business, which saw revenue decline 1% year over year. HP bulked up on services when it bought EDS for almost $14 billion in 2008, but it has struggled since. It?s due for a change, Whitman says. ?Services is a turnaround, and it?s going to take three to five years,? she says. What it will take, Whitman says, is moving away from slower growing, lower margin services?typical IT outsourcing offerings?to faster growing and higher margin cloud services, application modernization services, security and data analytics. ?Headcount will be down (in the services business),? Whitman says. ?But I believe we will have a smaller, more profitable services business over the next two to three years.?

Overall, Whitman was optimistic about HP?s turnaround and the signs she is seeing in the marketplace. In HP?s largest business unit, PCs, Whitman sees healthy demand in the near term, especially with Microsoft?s Windows 8 launch driving new computer purchases. ?We feel pretty good about end-user demand for our products,? Whitman says. ?We have struck that perfect balance between design and the workhorse requirements of customers.? And while the printer business was down 11%, Whitman sees opportunity there too. ?We need to step up our marketing and demonstrate new use cases for printing,? she says. ?We are going to get very aggressive in the printing business, and I feel very good about our way forward.?

If there was a note of caution from Whitman, it was centered on business in Europe. There are the unresolved issues around the economic bailout and potential default of Greece, and the unknowns Fran´┐Żois Hollande France?s newly-elected president brings, she says. ?Our business in the US and Asia is strong,? Whitman says. My belief is that Europe is going to get a little bit softer before it gets stronger.?

Buried in the news of the layoffs was that HP actually beat earnings estimates by analysts. HP?s share price was up almost 10% in after-hours trading. ?We feel cautiously optimistic coming out of Q2,? Whitman says. ?I wouldn?t say we have definitely turned the corner, but we are getting there.?


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