Massive HP Job Cuts 'Painful But Necessary'

By Craig Galbraith Comments

Intense competition has plagued tech giant Hewlett-Packard (HP) over the last few years, so it didn't come as a huge surprise Wednesday when the company announced job cuts; nonetheless, 27,000 is a huge number – accounting for 8 percent of HP's workforce.

Palo Alto, Calif.-based HP has had its hands full with competition over the past few years. As mobile devices have become ubiquitous, the PC market has started to decline, and HP hasn't been able to find a foothold in the mobile market. Apple and other mobile-device makers have taken the company to the woodshed.

HP made a big leap toward mobility in 2010 when it acquired Palm for $1.2 billion. But that deal proved to be too little, too late, as consumers rejected Palm devices and webOS – though it was widely praised in the developer world – and instead turned toward Apple and Android.

All of that has led to smaller profits and shake-ups in management at HP.

The layoffs will happen by the end of fiscal year 2014, saving the company at least $3 billion per year. CEO Meg Whitman told analysts that the cuts are hard, but "absolutely critical" for the company's long-term health. Industry-watchers support the decision but are unsure how it will play out.

HP’s restructuring is painful but necessary in order to restore market and customer confidence after two years of turmoil," said John Madden, principal analyst at Ovum. "We’ve been down this road before, of course, and the market remains skeptical about how these operational changes will enable HP’s stability, especially for its enterprise business. What’s somewhat encouraging is HP’s indication that most restructuring savings will be directed toward R&D – a part of HP’s legacy and history which the company has sorely undervalued in the past few years, but which will be a critical component of HP’s recovery in new product and service development."

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