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Painful Reinvention Could Decimate HP Workforce

By Rachelle Dragani E-Commerce Times ECT News Network
May 18, 2012 10:38 AM PT

HP is planning significant layoffs with the aim of increasing efficiency and focusing on new products, according to a New York Times report citing an anonymous source.

Painful Reinvention Could Decimate HP Workforce

The company could lay off more than 30,000 workers, or nearly 10 percent of the company's total workforce of 324,000.

The large-scale cuts are reportedly part of CEO Meg Whitman's effort to rebuild the company. Whitman took over as CEO last September, taking the reins from Leo Apotheker. During Apotheker's tenure, the company's stock took a dive, losing about 43 percent of its share price. Some of Whitman's main goals coming in were to restore value and increase efficiency across the company.

HP declined to comment on the story. It is expected to reveal more details about possible corporate restructuring during its quarterly earnings call, scheduled for May 23.

Keeping Focus on China

It's unclear which divisions will take the hardest hits, but one area that HP likely won't abandon is China. The company is aggressively investing in Beijing, Shanghai and other major Chinese cities in areas such as cloud computing, systems research and development and technology infrastructure transformation projects.

"HP clearly is investing in China, with in-country research and development and product development for China-specific products," Frank Gillett, an analyst at Forrester, told the E-Commerce Times. "I would expect little or no adjustments there."

One area that might take a bigger hit is the new created division that merged the Personal Systems Group and the Imaging and Printing Group. Under Apotheker, PSG risked being spun off from the company, but Whitman announced she would combine the two about two months ago. Layoffs were expected afterwards to consolidate resources in both of those areas.

"With the merging of the two business units PSG and IPG, they expected efficiencies from combining logistics and shipping in the supply chain, and savings from combining the partner and channel programs that had been completely separate," said Gillett.

Shifting Focus

In addition to keeping up overseas investments, Whitman also reportedly hopes to use some of the increase in cash to focus on new HP products. The company has long been a sales leader in personal computers but has fallen behind competitors in the tech industry in newer areas such as smartphones, tablets and cloud computing.

The added savings that could come from a set of layoffs, though, could be what the company needs to get back on track, said Gillett. He noted that when speaking to executives at HP's Shanghai product launch last week, he learned the company was looking forward to increased investment in R&D.

HP has other reasons to have a positive outlook as well, Trip Chowdhry, a senior analyst for Global Equities Research, told the E-Commerce Times.

"HP cloud presentations to developers and technical audiences is very impressive," he said.

New hardware at the new Apple data center in North Carolina and a significant amount of Facebook servers will be provided by HP, he added.

Overall, said Gillett, refocused energies on some of the company's strongest elements could restore some of HP's recent declines.

"HP doesn't strike me as particularly inefficient, but they do have lots of people in the Enterprise Services and Technology Services business units," he said. "If those units aren't doing well enough in the market, that would be one place to cut people to match market demand or try to increase efficiencies."

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