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HP Planned Layoff Is Hardly A Bad Omen For HP

But the news is not all bad as it seems, especially for HP for the following reasons: As Meg Whitman explained, the turnaround effort is on track at HP, it is just a process to eliminate inefficiency. Viz. that: HP just signed a contract with Foxconn to make low level servers for HP, that alone will at least eliminate 5K manufacturing jobs at HP ( that is to shift the HP employees from HP to Foxconn), plus the sale force, management associated with this manufacturing, that could be as high as 7K work force. HP recently enhance it channel sale force in the world, it shifted most of their effort to their channel partners, that will eliminate 10K job at HP; all they need now is just to manage the channel partner inventory requirements, that requires far fewer HP employees. These channel partner forces are very large; some of them are more than 50 persons each. There are hundreds in North America; multiply that in Europe, Latin America, Far East and Africa, you can see this is indeed a large number. HP still has 300+K work force, that is far more than Apple ( about 30 -50K employees), yet the revenue is less than Apple's. I am glad that HP is holding onto the manufacturing business, still making large portion of its revenue in hardware; comparing with IBM ( at IBM, everybody wants to wear blue suites, making "big bucks", unwilling to get their hands dirty), it is far better in the fundamental sense. IBM has lost its mojo in hardware design or manufacturing, it is far less competitive in business fundamentally. Although most of the HP's manufacturing facilities are partners outside of US, but there are still many HP engineers participating in the design, doing the IR&D and making the product that will keep the knowledge in HP. It is in far better shape than Apple ( Apple is just assembling someone else products in the factory other than its own) or IBM for that matter. If you understand this, you will not question Meg Whitman's argument HP is on the mend. On the other hand, the job lost from HP is not good news for HP employees or the US middle class, it shifts the jobs to Foxconn or to China. That is the result of high US cost and inflated wages compared with employees in the developing countries. In summary: layoff is not bad news for HP, or a bad omen for the future, it is a necessary survival measure for HP presently, one should applaud its effort (or to buy the stock?!).

Disclosure: I am long HPQ.