The market has long accepted and in fact been primed for Hewlett-Packard's radical reorganization.
On Nov. 1, the company will split itself in two entities: HP Enterprise and HP Inc. The former will sell data center products and enterprise services, while the latter will sell the company's iconic PCs and printers to consumers.
That plan is still going forward, but as headlines blared yesterday one of those entities will enter the market seriously weakened, possibly fatally.
Massive Job Cuts
As part of the restructuring, HP will cut 25,000 to 30,000 positions, mostly at HP Enterprise Services, the business and technology services unit.
"These restructuring activities will enable a more competitive, sustainable cost structure for the new Hewlett Packard Enterprise," CEO, chairman and president Meg Whitman noted in a press release.
"We've done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring."
Just on the face of it, the cuts are alarming.
HP has been steadily trimming its workforce for years to reposition itself after several disastrous acquisitions, with some 55,000 employees let go. This latest round — of which HP gave no advance notice unlike previous layoffs — will reduce its headcount by another 10 percent.
All About Numbers
And what to make of the fact that the layoffs are in the division once lauded by Whitman as the company's salvation and hope for a better future?
On Tuesday as she explained the reductions, Whitman was all about numbers.
The reductions will help the company stay in line with specific revenue trajectory and expand its profit margin, she said. Specifically, they will allow HP to save about $2.7 billion a year, although it will have to take a $2.7 billion charge to carry out the reductions.
Whitman, as she presented the plan to the world, assured everyone that the two companies were now ideally positioned for growth.
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She wasn't exactly preaching to the choir though, especially for enterprise IT shops that rely on HP.
Service Has Been Slipping
"The biggest losers in these cuts are enterprise IT customers," Laura DiDio, analyst with Strategy Analytics told CMSWire.
"I can't imagine how anyone watching this wouldn’t reconsider their decision to go with HP in the data center."
IT shops have already been noticing the effects of the previous cuts, DiDio said, citing satisfaction surveys in this space. HP enterprise customers have been noticing longer wait times with service calls and longer wait times for replacement parts, according to these surveys.
Conversely, the biggest beneficiaries of the move will surely be HP's rivals. "HP has just opened the door to a lot of competitors doubling down on their attempts to grab marketshare from HP," she said.
For servers on the high end that would be IBM and Cisco. Lower end, or workhorse type service providers poised to benefit include Dell and Toshiba.
The End?
Indeed the expected bloodbath is expected to be so great that DiDio wonders if HP can survive it. "They have cut fat in the past but those days are long gone. Now they are cutting deep into the bone and muscle. You can't grow by cutting."
HP, of course, has been trying to disprove that theory for years with very limited success.
