) is moving inline with the global downsizing trend and announced
its plans to retrench an additional 2000 employees to save costs.
CEO Meg Whitman has been restructuring operations to boost
company's profits and this layoff is a part of that strategy
adopted by her and the senior management team.
With the addition of the 2, 000 planned layoffs; HP is now
projecting 29,000 job cuts by 2014, up from 27,000 projected by the
company in May. This is almost 8.3% of the total staff employed by
The company did not explain the reasons for the additional job
cuts, but it is evident that it is trying to save cost and increase
its operational efficiency.
HP has been suffering a tough run and the reduction in personal
computer sales badly affected the company among the other
headwinds. Introduction of tablets and other mobile computing
devices have taken a toll on HP's PC sales. Particularly because HP
had a thriving notebook business that was the worst affected by the
new-age tablets. While
) Windows 8 and
)-inspired Ultrabooks will help this year, the weaker consumer
demand overall will dampen the impact. To offset this impact, the
company is trying to explore more profitable lines of business,
which includes segments such as business software and consulting.
However, this might take some time to have a meaningful impact on
Also, HP continues to see many challenges, stemming mainly from
macroeconomic concerns and secular changes in the printing market.
(LXK) exit from the printing business could improve chances of
share gains, this is not likely to be meaningful in the long term,
as the inkjet market continues to shrink due to the easy
availability of mobile media devices such as tablets and
smartphones, which are reducing the need for taking printouts.
Margins in the services business are also likely to remain weak
The company is in a dire need to rebound as it is constantly
losing profit and market share. The company could have chosen
either of two turnaround strategies. The first would be by cutting
costs related to labor, PP&E and Marketing. The second would be
the acquisition for growth strategy. The company opted for the
first one as it was easier to implement.
A similar strategy has been adopted by the second largest
), who is planning to cut its UK workforce. This is a strategy to
trim the company's expenses by more than $2 billion over the next
three years. Dell is also taking necessary steps to diversify into
high-margin business that will offer better growth opportunities
for the company. Thus, the two major technology companies seem to
be moving in the same direction.
HP is implementing various strategies to generate growth. As
discussed, the company is implementing some major restructuring
actions to manage costs, drive growth and improve the health of its
Currently, the company holds a Zacks #3 Rank (Hold).
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