Business, Hardware

Why the Layoffs at Hewlett Packard Could Be Just the Beginning

While we at Bright Side of News always try to look at the bright side of things and have an optimistic view of the industry, there are times when we simply cannot help ourselves and must say something.

Case and point is Hewlett Packard [NYSE:HPQ] and their current announcement of their reduced earnings of 31% over the same quarter a year ago as well as layoffs of 27,000 people. There is no doubt that this is bad news, especially in such uncertain economic times. The problem is that we do not believe that this is the end of the bad news, but rather only the beginning. First of all, we believe that HP as a company has become far too bloated and cannot compete with their competitors.

The layoff of 27,000 people is without a doubt a first step in the right direction. How bloated is HP exactly? In 2011, Hewlett Packard employed just shy of 350,000 people worldwide. This is in comparison with Dell at 100,000 , Apple at 60,000, Acer at 7,800, Sony Group at 162,700 and Samsung Electronis at 101,000. Even when you add all of these competitors of HP’s together, they all employ just 81,500 employees more than HP. This is a huge problem. When you have that many employees, your workforce begins to become a liability rather than an asset and you begin to drain yourself purely as a result of maintaining such a large bureaucracy. If HP wants to really become nimble, they need to spin off divisions of the company or give some of them less importance in the future of the company’s success.

Employees (blue) vs Revenue (red)

 *Note: Since Sony does not provide Sony Electronics employment figures we went with the whole company’s employment figures. Realistically, their number should be much lower.

Currently, HP’s main business units consist of their consumer division which delivers laptops and desktops/all-in-ones, their imaging division which handles most of the printing technologies, and their enterprise server and networking business and you’ve essentially summarized HP’s business units succinctly. They do have a software division, but that primarily services their enterprise customers as additional services.

HP needs to focus more on delivering cloud services to their enterprise customers as well as shifting their imaging business towards a paperless model. The truth is that there’s a reason why the US Postal Service is losing money and a lot of it has to do with the fact that we’re communicating more and more digitally. HP needs to recognize this truth and begin to acknowledge that volume for their consumer printing division is going to decrease slowly over time. In addition to that, HP really needs some real design inspiration for their consumer products because the majority of their latest products look like carbon copies of Apple’s products and they’re not doing themselves any good by doing so. By pruning their imaging division down, HP may be able to further cut their overbloated workforce to a manageable figure.

Sadly, though, none of what we said is what really concerns us most about HP. What really bothers us the most about HP’s current state of affairs is that the company is wading into the mobile age without a mobile strategy. How bad is HP’s mobile strategy? Well, HP effectively nuked their mobile strategy when they abandoned WebOS and opensourced it. By abandoning WebOS (remember, they got that from ‘saving’ Palm?) HP has effectively put themselves back into step one of building a mobile ecosystem. They had a plan with integrating WebOS into tablets, printers, smartphones, and even all-in-one computers but somehow that idea faltered and now they’re up a creek without a paddle.

Furthermore, the company got rid of innovators such as Rahul Sood, and sent key executives into retirement. They lost the innovation front on the PC, and mobile came as an afterthought.

The situation is so above and beyond everyone else’s heads that during HP’s last earnings call the word mobile was not mentioned once during the prepared remarks nor during the Q&A session (here’s looking at you analysts). So, mobile is such a terrifying word to both HP and analysts that everyone was afraid to even say the word for fear of an answer, which we’re afraid is going to be, "We don’t know." Where do you go after you spend $1.2 billion on a company like Palm and then effectively throw away everything you did with it? How do you explain to your investors that you spent $1.2 billion on a mobile device company and now you have no mobile devices to offer? There are a lot of tough questions that HP has to answer and unfortunately, nobody is asking them.