Several analysts on the call asked about the layoffs. Although Whitman seemed slightly off balance at the first question, which took an unusually challenging tone, she quickly regained her footing and provided increasingly confident answers, including the following:
This company has been through a lot -- the acquisitions of Compaq and EDS, the acquisitions of 11 to 20 software companies. Part of what we are doing is integrating, streamlining the system, automating processes which have not been done in a while
No company likes to decrease the workforce. I think our employees live it every single day. Our employees know we can be more efficient. They are our biggest sources of ideas.
I don't think anyone likes this, but I think we've done a good job of explaining where we are at.
My outlook has actually not changed in where we are at in our turnaround and our return trajectory. I'm feeling more confident because we have seen a stabilization of revenues and I really like our product road maps.
Many people said this is the best product line up we have had in a decade. We need to run this co more efficiently in terms of ease of doing business and being faster, nimbler in decision making.
So it is a battle of two of the femails CEO's of the tech titans of the IT industry, IBM and HP. Who will win the battle? Who will claim the title of laying off the most people by 2015? Ginny or Meg? At least Meg is up front about HP's plan, while Ginny plays the role of "snake in the grass."
Although the sell-off of the test equipment business and the acquisition of Compaq might have been questionable moves, the more recent acquisition of Palm for $1.2B and the nearly immediate killing of it and exiting the mobile business didn't help HP either. I was amazed that such a large company could make such moves so quickly -- buy a company for that kind of money, launch new mobile products based on Palm's WebOS, then exit the business entirely -- all in less than a year. If you make the analogy of a business as a feedback control system, it was as if HP in 2010-2011 saw its phase margin disappear and began rail-to-rail oscillations.
This goes back to 2000 when they sold off the high margin Agilent business and bought Compaq to focus on the supposed high growth computer business. It was a questionable move then, and HP is still paying for it. Not the great company anymore that Hewlett and Packard founded.
Hp has some long term research in memristors and photonics. But it seems that the current leader in memrisotrs is a startup called crossbar, they already have a prototype and they talk about production in 2015, when hp is talking about 2018.
And hp has their new servers called moonshot , but they compete with the reletivley new ocp open server standardby facebook , which lets taiwanese manufactueres offer low-margin servers. So it would be a tough battle for hp.
Another possible strategy for HP would be the google "moonshot products" strategy , but it doesn't fit well for hp's financials , because it's quite risky and long term.
They're also starting to sell 3d printers for enterprise(which could be a huge market, disrupt many supply chains) , which they can do since many technologies have gone off patent, but hp still has technologies to optimize 3d printers and reducing cost of prinrting material, and has a lot of relevant organizational capability for that market. They will announce a product in november, talk about big boost in speed.
Most analysts on Wall Street took the planned layoff at HP as negative news; they were fast to trade off the HP stock as soon as the news hit the tape in the afternoon on 5/22/2014. 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?!).