Hewlett-Packard Co (HP) plans to cut as many as 16,000 more jobs in a major ramp-up of chief executive Meg Whitman’s years-long effort to turn around the computer maker and relieve pressure on its profit margins.
Whitman said the turnaround remained on track and that her raised target reflected how HP continued to find areas to streamline across its broad portfolio, which encompasses computing, networking, storage and software.
However, some analysts wondered whether it signaled a worsening outlook for the coming year, or if even more jobs are to be cut.
Photo: Reuters
“The rationale makes sense,” RBC Capital Markets analyst Amit Daryanani said.
However, “you do worry if there’s a finality to this process, or if it’s an ongoing thing that may affect morale at the end of the day. So far the trend has been worrisome,” he said.
HP, whose sprawling global operations employ more than 250,000 people, estimated about three years ago when it first hatched its sweeping overhaul that it would need to shed 27,000 jobs. That number rose to 34,000 last year.
On Thursday, it estimated another 11,000 to 16,000 more jobs needed to go, scattered across countries and business areas. That took the total under Whitman’s restructuring to 50,000.
The US company is trying to reduce its reliance on PCs and move toward computing equipment and networking gear for enterprises, part of Whitman’s effort to curtail revenue declines and return the world’s No. 1 PC maker to growth.
However, that goal remains elusive. The company posted a disappointing 1 percent drop in quarterly revenue, as it struggled to maintain its grip on the shrinking PC market and weak corporate technology spending.
That marked its 11th consecutive quarterly sales decline.
HP shares closed down 2.3 percent at US$31.78, after the company inadvertently posted the results on its Web site more than half an hour before the closing bell in New York.
Research jobs, which are vital for innovation and long-term growth, will continue to grow, Whitman said.
HP is looking to cut back more in “areas not central to customer-facing and innovation agendas,” she said in an interview, rather than areas like research. “That’s not what we’re doing here. You need to look at the R&D spending, which is up.”
HP posted sales of US$27.3 billion in its fiscal second quarter ended April 30, just shy of the US$27.41 billion analysts had expected.
Whitman said China remained a challenging region, though revenue from that country rose in the quarter. US companies like IBM Corp and Cisco Systems Inc have blamed recent lackluster performances on a backlash against US-based companies in China, in the wake of US spying allegations.
On Thursday, HP forecast full-year earnings per share of US$3.63 to US$3.75, compared with Wall Street’s estimate of US$3.71.
It reported non-GAAP diluted net earnings of US$0.88 a share in the second quarter, up 1 percent from a year earlier and about level with what analysts, on average, had expected.
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