Feature
Just because you know something is going to happen -- particularly something bad -- it can still have a negative impact. A case in point is the loss of 27,000 jobs at HP out of its estimated 350,000 workforce.
We all knew that this was coming with indications that something was on the cards much earlier in the year. But even still, 27,000 is a big number, even for a big company -- in this case, about 8% -- indicating that some major restructuring is going on inside, even if it's not clear what the purpose of that restructuring is.
HP's Strategy?
From an investor point of view, this will save about US$ 3 billion per year, which will be nice given the financials that HP has just reported for the end of Q2, but what actually happens product-wise might not be so good.
Completing the image of a ship with no destination, HP has also announced that Mike Lynch, which HP acquired along with his company Autonomy for a controversial US$ 10 billion last year, is also leaving the company, despite saying a number of months ago that he wanted to stay.
What’s interesting about this is that in the announcement of the job cuts, Meg Whitman said that the money saved would be spent in growth areas like cloud storage, an area in which Autonomy already excels.
Autonomy Without Lynch
Whether Autonomy manages to keep going in HP without Lynch is the question du jour at the moment, with many pointing out the number of companies that HP has swallowed whole over the years, without even spitting out the pips.
There is also the fact that the rumor mill in the UK is suggesting that Lynch is already looking at developing a bigger and better Autonomy -- although clearly not called that -- with the big stash of cash he was paid by HP for his company, estimated to be in the region of US$ 800 million.
Add to the mix the fact that according to recent reports in ComputerWorld UK, close to 20% of the management team of Autonomy has left since it was taken over by HP.
These include -- again, according to the reports -- president Sushovan Hussein, chief financial officer (CFO) Steve Chamberlain, chief technology officer (CTO) Pete Menell, chief marketing officer Nicole Eagan, chief operating officer Andy Kanter and Martina King, head of Lynch’s more recent pet project, the augmented reality platform Aurasma.
So put all that together and you get a pretty potent mix for another company and another concept like IDOL, even if it’s not called IDOL.
HP's Turnaround
But all this is, for the moment, just the subplot to the latest episode in the HP turnaround saga, if indeed there is a turnaround.
The figures that were also released were not great, but Whitman says that it is in the process of turning around and about to take off in the right direction.
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Earnings hit US$ 1.6 billion during the three months ending in April, its fiscal second quarter, which is a 31% drop from US$ 2.3 billion at the same time last year.
HP in Q2
Revenue for HP's fiscal second quarter fell 3% from last year to US$ 30.7 billion. Only in software could this be flagged as a success, and sure enough, that’s exactly what Whitman said of it
I wouldn't say we have turned the corner, but we are making progress," Whitman said during a conference call.
For Autonomy: "License revenue was disappointing, sales execution was a challenge and big deals were taking longer to close,” Cathie Lesjak, HP's finance director said.
Explaining the job cuts, Whitman also said, "While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long-term health of the company."
We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholder."
Whatever else about the dreadful loss of jobs around these events, it seems that the markets are happy with the way Whitman is progressing her mandate.
In trading in the hours that followed the announcements yesterday, HP’s shares rose by US$ 1.97, or 9%, but still only to half the price they were just before Mark Hurd stepped down in mid-2010.
Also, let's keep in mind that massive job cuts are not exactly unfamiliar to big IT companies. HP itself has had a number of them already. It cut 14,500 job in 2005, as Hurd swung the ax, and who is --probably unfairly -- being cited as the perpetrator of HPs current woes.
Another round of 24,600 cuts came in 2008 after HP bought technology consulting service EDS for US$ 13.9 billion. Whether any of these measures stabilizes HP is anyone’s guess, but it will be interesting to see what Q3 produces and how HP reacts to that.
