Hewlett-Packard, the largest technology company in the US, is preparing to lay off up to 27,000 employees as part of CEO Meg Whitman’s restructuring plan. Seen as a cost-cutting measure, the layoffs are expected to save the company up to $3.5 billion by 2014.
The layoffs comprise 8% of the company’s nearly 350,000 employees worldwide and are expected to come primarily from the printing division, which in March was merged with the personal systems division. In 2011, profit in the printing division fell 10% and sales were stagnant.
Whitman’s goal is to turn HP into a more streamlined business, one that is smaller, but more efficient. Analysts says the layoffs are a step in the right direction, but that it is too early to tell what the impact will be long term.
HP made cuts before in 2010, when 9,000 jobs were eliminated. An additional 275 were cut in February. Those cuts had no effect on the company’s profit and loss, and it is believed that more drastic changes are needed to be made for there to be real change.
Evercore analyst Rob Cihra explained to Reuters: "We believe many of HP's further risks stem from inconsistent operational execution and recent large acquisitions, which combined with aggressive buy-backs have weakened its balance sheet."
While HP is still the world’s largest computer manufacturer, PC sales fell 25% during the fourth quarter of 2011.
Rival Dell Also Struggling
HP rival Dell faces a similar situation; both companies are struggling to remain relevant in a world where consumers are abandoning personal computers in favor of tablets and iPhones. PC sales have fallen over the past several years as more people turn to mobile devices.
HP failed to make a smartphone or tablet that customers want to purchase. Meanwhile, Dell reported its profit and revenue for the first quarter were weak due to lower PC sales, with its revenue forecast showing a continuation of the trend.
Dell plans to turn its focus to small and medium sized businesses. Analysts say HP’s restructuring will probably see results in the next few quarters, while Dell’s could take much longer.
At the same time, however, analysts also caution that the drop in PC sales will continue throughout 2012.
Key Statistics - Global PC Industry (source: MarketLine)
- In 2010, the personal computer market grew by 6% and was valued at over $175 billion globally.
- In 2015, the global PC market is predicted to be valued at more than $174 billion for a decrease of 0.6% since 2010.
- In 2010, the PC market grew 8% and reached nearly 294 million units globally.
- In 2015, the PCs market is predicted to have a volume of 446 million units globally, or an increase of 52% over 2010.
- Nearly 40% of the global PC market value comes from the Americas.