It seems that now is not a good time to be an employee of Hewlett- Packard (HPQ), as the company may soon announce plans to cut 30,000 jobs across the company. In total, the company may cut as much as 10% (with some reports giving a lower estimate of about 8%) of its staff worldwide through layoffs and voluntary retirements by its employees.
Employees working in China, the biggest growth area for the company, as well as those working in research and development, may all be spared during this huge cut. The impact this will have on employees is obviously one that could be potentially devastating, but what about the effects on the company itself?
If this is a ploy to offset costs, then it will most likely be effective and the company may be able to recoup some of its losses with these savings. The company's CEO Meg Whitman claims that the money that Hewlett- Packard will save by doing this will go to "increasing the efficiency of the company's sales force and on creating new products". This is all part of her turnaround plan for the company.
At this point, the layoff and retirement plans are merely a matter of speculation as the information supposedly comes from sources that do not wish to be named due to the fact that they are not in fact allowed to speak for the company. But, although these claims are not yet official, I expect them to be announced formally soon. Hewlett- Packard itself declines to comment on the job cuts.
Recently, Hewlett- Packard has managed to develop a reputation as a company that is not quite able to keep up with its competitors, especially in areas like smartphones and tablet computers, so cutting jobs may be one of the few options left for Hewlett- Packard. Consumers are no longer particularly interested in bulky PCs and Hewlett- Packard just can't seem to get a foot in the tablet game.
On top of that Hewlett- Packard seems unable to keep up with developments in cloud computing. A lot of this is due to the "lack of clear leadership" that the company has had to endure for the last few years. Hopefully the new CEO Whitman will be able to take control and get things back on track. I'm sure that Hewlett- Packard's investors are hoping that she will, but at this early stage in her leadership it is difficult to judge whether she will successful. The company's last two CEOs were both forced out.
Some feel that if Hewlett- Packard does not get a firm grip on its PC market, it will "tank". In this age, where computing is at an all-time high, a stock like Hewlett- Packard should be a solid option to back. However, great changes are needed if Hewlett- Packard is to improve. It is quite a sad turn of events that this company, which for so long held its own in terms of the market share, has to resort to major job cuts in order to stay afloat. The question we need to ask ourselves is whether Hewlett- Packard is likely to survive this situation or if it is time to get out.
Let's take a look at a couple of Hewlett- Packard's competitors in order to get an idea of what it is up against:
Accenture (ACN), a competitor in devising business solutions and management, is making a fairly good attempt at capitalizing on the demand for cloud solutions. On top of that, it is in the process of expanding its saleforce.com delivery capabilities and enhancing it skills training and certification program. The company's new "Cloud Centers of Excellence" will be launched in the United States and Canada, and in the UK and France later this year. Accenture will be adding to its already impressive capabilities with these developments.
IBM (IBM) also seems to be keeping up in terms of cloud computing, unlike Hewlett- Packard. The company recently introduced an "enterprise e-Commerce software version, Commerce on Cloud designed for data sharing and marketing and supply chain processes in the cloud". This will allow companies to maintain an online store front easily that will make online consumerism a far easier experience for everyone. These are the kind of innovations that I would like to see from HP, before that particular company earns back my trust any time soon.
Dell (DELL) is looking to future tablets for deliverance from the situation that it is currently in. The company recently saw a significant slump in consumer sales of its notebook computers and other mobile devices and it is now relying on the possible success of the new Windows 8 touchscreen products that will be out soon. It blames the decrease in sales on cheap entry-level products of the kind that it does not produce itself. So, Hewlett- Packard is not the only company that needs to start looking towards things like tablets in order to secure its future.
Lastly, competitor Super Micro Computer (SMCI) also remains well ahead of the game. Recently, it announced that it is "shipping server solutions optimized for Intel Xeon E5-2400 "Sandy Bridge-EN" and E5-4600 "Sandy Bridge-EP" series processors'. This may sound like gibberish to someone who does not understand it, but what it essentially means for stock holders is that this company has once again demonstrated its ability to keep ahead of the game and deliver the highest quality. In short, it has successfully managed to develop a very good reputation for itself, unlike the unreliable reputation that we have to expect of Hewlett- Packard.
The hope is that the money saved from layoffs will help Hewlett- Packard jump into the game. It won't be that easy. It needs to reinvest in its research and development and come out with truly astounding products, as it once did. This will take time, so don't expect the stock to go anywhere this quarter. The best hope is the distant future for Hewlett- Packard.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.