HP Touts R&D as Silver Lining to Massive Layoffs

HP has posted its second quarter earnings and announced it will lay off 27,000 workers worldwide in an effort to simplify its business and increase efficiency.

HP beat Wall Street expectations with its earnings but still faces questions about how it will compete in a changing tech industry.

The company’s reported US$30.7 billion in sales for the quarter, down 3 percent from the period a year ago. HP brought in $1.6 billion in profit, down 31 percent.

In addition to the earnings report, HP confirmed rumors about its plan to lay off about 27,000 workers, or 8 percent of its worldwide workforce. Many employees will leave the company with an early retirement package.

HP expects to save as much as $3.5 billion from the layoffs by the end of fiscal year 2014, including a $1.7 billion pretax charge that will have an impact on fiscal 2012’s results. The company will put most of those savings back into research and development investments.

The earnings report and layoff news sent the stock on an upward climb in after-hours trading. Shares had lost more that 12 percent on the year so far, but continued to rise after Thursday’s open and were up as much as 7 percent going into the afternoon.

HP didn’t respond to our requests for comment.

Need to Trim

After being the subject of rumors last week, HP’s significant workforce cuts came as little surprise.

“We view this as a necessary, and not unexpected, step in the turnaround story, ” Michael Holt, analyst at Morningstar, told the E-Commerce Times. “This is a company that’s been struggling, and the new management team is in.”

CEO Meg Whitman is at the head of that new management team. Executive turnaround is part of the reason the company has been struggling, said Holt. Whitman took over in September after previous CEO Leo Apotheker was ousted after just 11 months in the position. Whitman came in acknowledging the challenges that HP faces and that a transition might not be easy.

“They’re acknowledging a lot of these issues and they’re attacking them in a methodical manner,” said Holt. “That means realigning the workforce with opportunities that they pursue. It’s a long process, and it’s a messy process, but for the first time in a long time I think we have a sense they’re not spiraling out of control.”

Changing Industry

Many of the challenges HP faces are due to the changing computing industry. The product at HP’s core — the traditional PCS — is facing rising competition from mobile and tablet devices that many users prefer over the bulkier, pricier laptops.

“HP is struggling with industry issues,” Frank Gillett, analyst at Forrester, told the E-Commerce Times. “It’s hard to differentiate Windows PC product offerings, so there’s price pressure for consumers and enterprise buyers, especially in the fast growing emerging markets.”

Rival Dell is also struggling to keep up in the new marketplace. The Texas company released its own earnings report this week, but unlike HP, it fell short of already low expectations, and the stock took a significant hit.

Whitman has acknowledged the shift in the industry. She said Wednesday that much of the savings from the layoffs would go toward investing in R&D to stay on top of the evolving marketplace, especially in areas such as the cloud, security and information management.

She also told Reuters that the company would have a new tablet offering for the holiday. Unlike previous HP tablets, though, it would launch with Windows 8, the upcoming operating system from Microsoft that is supposed to be better suited to mobile devices.

Even if Windows 8 is a hit, though, said Holt, it is still up against several competitive models, which could make HP’s road to recovery a long one.

“HP has the scale to be competitive, but there are several players who also have that,” said Holt. “There is going to be a lot of competition going forward for HP.”

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Forrester Predicts Net Loss of 1.42 Million US Jobs to Automation by 2032

Automation will claim more than 11 million U.S. jobs over the next decade, according to a report released Tuesday by Forrester.

That’s the bad news. The good news is that at the same time automation will create 9.63 million new jobs, for a net job loss for the period of 1.42 million jobs.

“The gap in jobs will present challenges to public policymakers,” observed one of the authors of the report, Forrester Vice President and Principal Analyst J. P. Gownder.

“It will mean that employees need additional reskilling into other professions, which isn’t something that every worker can accomplish on their own,” he told TechNewsWorld.

“Yet,” he continued, “the ability of public policy to succeed here will vary. In Germany, where there are tight connections between universities and employers, it will be easier to accomplish than in the United States, where employees are often expected to find their own solutions.”

Reskilling Required

Jayant Narayan, manager of the Global AI Action Alliance of the World Economic Forum, an international non-governmental and lobbying organization based in Cologny, Switzerland, added that those job losses would create challenges for both the government and private sectors.

“For governments, it raises questions around social safety nets, investment in life-long learning programs and STEM training for citizens, among other factors,” he told TechNewsWorld.

“Some of these parameters, like reskilling would have a medium to longer-term horizon,” he added, “as there might not be a quick fix or a quick reskilling opportunity.”

“For the private sector,” he added, “this raises questions around helping workers break siloed job functions and developing a broader array of versatile skills.”

Darrell West, vice president of government studies at The Brookings Institution, a non-profit public policy organization in Washington, D.C. agreed that a lot of worker retraining is going to be needed.

“There are retraining programs out there, but they’re often not very good, and they don’t qualify people for the new jobs that are being created,” he told TechNewsWorld. “We need better programs because new jobs are going to be created, but many of the people being displaced don’t have the skills needed for the new jobs.”

“A lot of the programs focus on very specific tasks,” he continued, “but the workplace is changing so dramatically it’s hard to find jobs for people who can only do one thing. We need programs that understand what firms need and what skills they are looking for.”

80% of Jobs Touched by Tech

Universities can contribute to reskilling by creating hybrid courses that blend humanities and science, maintained Narayan. “Engineers need to understand the ethics of systems and their ramifications before designing them,” he said.

West, though, asserted that community colleges are doing a better job than four-year institutions in preparing students for jobs.

“Community colleges are more geared to the local job market,” he said. “They’re trying to give people practical skills that will get them jobs. Some universities are training people for the workforce that used to exist, as opposed to the one that is emerging now.”

Forrester explained that the new jobs created by automation will be in professional services and information technology, as well as in new industries, such as renewable energy, green buildings and smart cities and infrastructure.

Chart: Cumulative US jobs lost and created

Source: Forrester’s Future of Jobs Forecast | Chart Credit: Forrester Research, Inc. | Reproduced with permission.

Gownder noted that people working in the new jobs will have to be conversant in working side-by-side with machines. “Whether or not you have technical skills, you need to be comfortable working on a mixed team of humans plus machines in which intelligent software plays a key role,” he said.

It added that the greatest impact of technology during the period will come in altering the tasks that make up any given job, not in taking over the job itself.

Ceding a specific task — like automating expense reports, augmenting the ability to solve data problems, or allowing a robot to mop a floor — changes the composition of a given job rather than replacing it, the report explained. Forrester expects 80 percent of jobs to be touched in that way by 2030, driving improvements in employee experience as specific tasks pass to machines.

“A lot of organizations are bringing in technologies that can augment human performance, as opposed to replacing it,” observed West. “We need to figure out how humans and robots can coexist.”

Attitude Change

Forrester also found a change in attitude among leaders about automation. Leaders have stopped viewing it primarily as a cost reduction effort and now see a broader array of perceived benefits, it explained.

It cited Forrester data showing that 41 percent of data and analytics decision-makers named cost savings as a benefit of adopting automation in 2018, but only 25 percent said the same in 2021.

Additionally, Forrester found a notable rise in the proportion of leaders noting deeper insights and competitive differentiation as benefits.

While the proportion that rated freeing up personnel to work on higher-value tasks held steady, it added, it’s now the benefit with the most resonance.

Among the broader array of perceived benefits from automation cited in the report are filling talent gaps, freeing up personnel to perform more advanced work, driving customer experience, improving quality and safety and gaining deeper insights from data to improve tasks and processes.

“Automation can be beneficial in relieving humans from dirty or dangerous jobs, and jobs that are completely routine and mundane,” West said.

Trust-Building Process

Forrester’s report noted that fears that automation will destroy jobs remain commonplace, and they aren’t totally unfounded. But the future of jobs will see a much milder impact from technologies like automation and AI than many observers expect.

Instead, it continued, technology and human workers will increasingly engage in iterative, interrelated collaborations, forming human/machine teams that drive new levels of quality, productivity, and customer — and employee — experience.

“This is a trust-building process,” Narayan said. “Workers should feel that they are part of the journey.”

“The most important thing companies can do is retrain their own ranks,” West added. “If people see an employer bringing automation in but training people for other types of jobs, workers will be more receptive to that. What workers don’t want is to be thrown out on the curb with no income.”

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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