By Spencer E. Ante
Hewlett-Packard Co. is cutting thousands more jobs, as efforts
to revitalize the company have sputtered amid a rapidly changing
technology landscape.
The Silicon Valley giant said Thursday it would cut an
additional 11,000 to 16,000 jobs on top of 34,000 positions it
previously said would be eliminated as part of a multiyear
restructuring plan. At the midpoint of that range, the new cuts
would trim an additional 4% from H-P's workforce of about 317,500
employees.
News of the job cuts came as H-P announced results for its
fiscal second quarter, revealing a drop in revenue that
overshadowed higher profit. The results follow two quarters that
had generally pleased investors, as the company appeared to
stabilize itself under Chief Executive Meg Whitman after several
years of turmoil.
H-P, known largely for personal computers, server systems and
printers, has been grappling with stiff competition and big shifts
in the technology industry. Challenges across its array of
businesses, along with the new job cuts, may complicate efforts to
revive growth and innovation.
Ms. Whitman sought to portray the unexpected job cuts as an
opportunity to further streamline a company that had grown bloated
over the years through multiple acquisitions.
"I'm not at all disappointed, I think it's the natural course of
what makes sense in a turnaround of this size and scale," she said.
The restructuring, along with continued investments in growth areas
such as cloud computing, analytics software and networking
technology, would set up the beleaguered Silicon Valley icon "as a
force to be reckoned with," she said.
But some analysts wondered if Ms. Whitman was trying to get
ahead of potentially weakening demand by announcing the new job
cuts.
The quarterly numbers were accidentally posted on H-P's website
ahead of schedule and before the close of regular trading
Thursday.
H-P shares, which had been trading higher earlier in the
session, fell following the disclosure by more than 2% to $31.78 at
4 p.m. The stock slid more in after-hours trading before rebounding
slightly.
Following the release of the financial results, H-P announced
leadership changes at its software and networking businesses.
Ms. Whitman said the new layoffs will affect all business units
and geographies. "We recognize that it is difficult for employees,"
she said. "Our employees know there are ways we can be more
efficient."
In fiscal year 2014, H-P said it expects the new layoffs will
produce approximately 2 to 3 cents a share of incremental savings,
an estimated incremental charge of approximately $500 million and
an additional cash-flow impact of approximately $200 million in the
second half of the year.
H-P said layoffs will also create additional savings in fiscal
year 2016 of approximately $1 billion a year, although some of this
will be reinvested back into its business.
For the quarter ended April 30, H-P reported that net income
rose 18% to $1.27 billion, or 66 cents a share, from the
year-earlier level of $1.1 billion, or 55 cents. On an adjusted
basis excluding certain expenses, H-P put earnings per share at 88
cents. Revenue fell 1% to $27.3 billion. Analysts on average had
expected adjusted earnings per share of 88 cents on revenue of
$27.4 billion, according to Thomson Reuters.
H-P's strongest-performing segment was its PC group, whose sales
rose 7% thanks in part to continuing strength in sales of computers
to businesses. PCs are H-P's largest business by revenue, but they
also typically produce the lowest profit margin of the company's
main business groups.
RBC analyst Amit Daryanani wrote that the mix of the company's
revenues is concerning especially if PC sales start to slow down
following the boost seen in April when some customers were forced
to buy new machines after Microsoft Corp. ended support for its
Windows XP operating system.
Performance at H-P's software group improved, as its sales were
flat with the year-ago quarter. In the previous quarter, software
sales fell 4%. But its large enterprise and printing groups took a
step backward, while its technology services group continued to
struggle.
While companies such as International Business Machines Corp.
are retreating from a hardware market with low margins and intense
pricing pressure, H-P is moving to bolster its computing hardware
business.
H-P's enterprise group makes servers, storage and networking
equipment and represents about a quarter of its total revenue and
roughly 40% of its operating earnings. In the latest quarter, the
enterprise group, which had grown slightly for the past two
quarters, saw its sales drop 2%.
Revenue in H-P's printing group fell 4%, compared with 2% in the
previous quarter.
As part of the executive changes announced Thursday, Executive
Vice President George Kadifa, who had served as head of H-P's
software operations, was appointed to a new job in charge of
strategic relationships. Taking his place will be Robert
Youngjohns, who previously led H-P's Autonomy unit, which makes
analytics software.
Ms. Whitman said the current head of H-P's server business,
Antonio Neri, was also appointed to run its networking
business.
For the current quarter, H-P put adjusted earnings per share at
86 to 90 cents.
Write to Spencer E. Ante at spencer.ante@wsj.com
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