This is a tragic story of an American icon reduced to a desk job supplying ink cartridges because of a futile attempt to please Wall Street rather than thrilling customers through continued innovation. Yes, I am talking about Hewlett-Packard (HPQ). The stock, which hit a seven-year low earlier Wednesday, has slumped 41% over the past 12 months.
The company had a turbulent year in 2011, which included an $11.7 billion deal for British software provider Autonomy Corp. and the September firing of Whitman's predecessor, Leo Apotheker. Apotheker had set the company toward potentially spinning off its PC business but Whitman in October decided to keep the business, though it offers lower margins.
In March, the company unveiled a sweeping reorganization plan that would fold its once-dominant printing business into its PC-making personal systems group and centralize many other functions. At the time, Whitman said the restructuring efforts would lead to job cuts, but didn't say how many.
No doubt those decisions enabled them to achieve target goals that generated bonus payouts for lots of people. But that thought process cannibalizes the future. Now that they have reached their future, the only response they can think of is to cannibalize further.
Enter their latest move. Nothing says company strength and solidarity like laying off 27,000 employees, or a staggering 8% of your total workforce. At least that's the way Hewlett Packard brass are spinning it.
To state my opinion further, I feel HP has been making short sighted decisions with respect to quality, design, support, and many other aspects of the business for many years now.
Peruse ANY user/consumer forum you care to, and they will uniformly pan the HP products, for cost, durability, support processes, virtually any aspect of ownership you care to consider. But this has been observable for YEARS and HP didn't take action.
Recent Earnings Highlights
- HP reported a profit of $1.59 billion, or 80 cents a share, down from $2.3 billion, or $1.05 a share, a year earlier.
- Excluding items such as restructuring charges and amortization, per-share earnings fell to 98 cents from $1.24.
- Revenue decreased 3% to $30.69 billion, above the $29.92 billion estimate from analysts.
- Operating margin narrowed to 7.2% from 9.4%
- Revenue from the company's services segment was down 1%, while its enterprise, servers, storage and networking segment saw revenue fall 5.5%.
- Sales in the core PC business edged up 0.4% as unit shipments fell 1%. Notebook revenue slipped 2.8% while desktop revenue increased 5.1%. The imaging and printing group's revenue declined 10%.
- The company also raised its full-year view to earnings of $4.05 to $4.10 a share from its February view of earnings of at least $4.00.
Apple (AAPL) has opened the flood-gates to a more light-weight, mobile style of computing. Mobile computing may sound the death knell for ailing PC makers currently on life support.