Hewlett-Packard Said to Consider Cutting as Many as 25,000 Jobs
Hewlett-Packard Co. (HPQ) is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
Context & Ripple Effects
Hewlett-Packard enters this decision with its credibility dented rather than broken: the TouchPad it launched in 2011 became the year's biggest tablet flop, and the company has been described as dysfunctional after a decade of missteps and scandals. Yet the operating picture was not uniformly bleak — on April 12, 2012 HP posted its best single-day share gain in more than three years, the same week reports showed its core PC business gaining market share as global shipments grew.
What changed with this report is scale and intent: people briefed on the plans tell Bloomberg that as many as 25,000 jobs — 8 percent of the workforce — are under consideration to counter ebbing computer and services demand. The story traveled fast, running the same day at the New York Times, Wired, PC Magazine and others, with AllThingsD adding that CEO Meg Whitman would announce a restructuring plan the following Wednesday targeting some 30,000 roles. Sources have also pointed to an organizational piece: folding the Imaging and Printing Group under the PC-making Personal Systems Group.
First-order effects
- Up to 25,000 HP employees — about 8 percent of the workforce — face potential elimination once Whitman lays out the plan reportedly set for next Wednesday.
- Pairing the rumored consolidation of printing under the PC group with headcount cuts would reset HP's cost base just as ebbing computer and services demand pressures revenue.
Second-order effects
- A leaner cost structure gives HP room to defend the PC market-share gains it posted in April 2012, tightening the margin math for every rival selling into a growing-but-cheapening PC market.
- With HP's own shares rewarding cost discipline — the April 12 surge being the clearest evidence — any shortfall against the reported target at Wednesday's announcement risks repricing that goodwill.
Third-order effects
- If the pattern holds, large hardware incumbents respond to secular PC-demand erosion with recurring multiyear reduction programs rather than one-time resets, steadily relocating engineering and services employment away from legacy vendors.
- Merging printing operations into the PC group, as sources describe, points toward consolidated hardware divisions organized around shared platforms instead of product-line fiefdoms.
The trend: Legacy hardware makers are meeting secular decline in PCs and IT services with successive mega-restructurings rather than growth spending, making workforce resets a recurring feature of the sector.