HP's Whitman: New Job Cuts Are Not A Sign Of Wavering Confidence In HP Turnaround

Hewlett-Packard CEO Meg Whitman Thursday told Wall Street analysts that her decision to eliminate as many as 16,000 additional jobs in no way should be interpreted as a sign that HP’s turnaround has veered off course.

"My outlook has actually not changed in terms of where we are in the turnaround and what my view is of the [future] revenue trajectory," she said.

[Related: HP To Eliminate Up to 16,000 More Positions ]

Whitman, in fact, said she is feeling "more confident" about HP's future, with the high-single-digit revenue declines of several years ago a thing of the past.

"We have had three quarters of pretty good [revenue] stabilization,’ she said. ’And I really like our product road map. Many folks who have been around HP for many, many years have said this is the best product lineup we have had in a decade."

Nevertheless, Whitman took repeated questions from analysts on the decision to amend the company’s May 2012 multiyear restructuring plan. The new job cuts bring the total job cutbacks under the restructuring plan to as many as 50,000 positions. HP had 317,500 employees of Oct. 31, 2013.

The job cuts came as HP posted second-quarter non-GAAP diluted earnings per share in line with the Wall Street consensus of 88 cents per share for its second fiscal quarter ended April 30. Sales came in at $27.3 billion, just below analyst estimates of $27.43 billion.

In the year-ago quarter, HP posted non-GAAP diluted earnings per share of 87 cents on sales of $27.58 billion.

HP shares were down 74 cents, or 2 percent, to $31.78 Thursday. HP shares were down 2 cents to $31.76 in after-hours trading.

HP said the 11,000 to 16,000 additional job cuts will save as much as $1 billion in fiscal year 2016. The additional cuts came after HP upped the number of job cuts just by 5,000 last December to 34,000.

Whitman, for her part, said the cutbacks are vital in order for HP to be easier to do business with in a market that is moving at warp speed. "We need to run this company more efficiently -- not only for the benefit of cost, which is good because we can then reinvest in things that will make us stronger but, frankly, in terms of ease of doing business, ease of working here and faster and more nimble decision-making," she said. "We are going to have to be quicker and faster and more nimble to compete in this new world order and, by the way, having a lower cost structure is an added benefit to that.’

Jed Ayres, chief marketing officer for MCPc, the $262 million Cleveland-based national solution provider ranked No. 89 on CRN's Solution Provider 500 list, said he is more confident than he has ever been in HP’s future. MCPc, in fact, expects to doubles it HP business over the next two years.

"We just had a town hall meeting with our entire company drilling into the HP product road maps and where they are going with compute, storage and cloud. HP’s products are as good as we have ever seen them and their cloud strategy is fantastic. We are very bullish.’

NEXT: Crediting Whitman For Making Investments In Next-Generation Products

MCPc's Ayres credits Whitman for making big investments to deliver next-generation products that will benefit HP and its partners in the midst of a massive turnaround effort. ’HP has an employee base the size of a small city,’ he said. ’The plan has to be dynamic. You have to have some ability to change course. No one can predict the future on a piece of paper from two years ago. The real story is HP is continuing to make R&D investments in cloud and converged infrastructure. They are investing in the right place. The real challenge is to be ready for these higher-growth, high-margin market transitions like cloud and converged infrastructure.’

Toni Sacconaghi, a senior analyst at Bernstein Research, a financial research firm based in New York, expressed frustration on the conference call at the additional job cutbacks. ’It feels like a whole new restructuring effort and a whole new outlook on the business,’ he said.

Whitman, however, said the additional cutbacks have nothing to do with ’confidence’ in the business outlook for HP, but rather are all about more opportunities to improve efficiencies in areas such as sales operations and marketing.

’There are so many opportunities to improve this company,’ said Whitman. ’We went after the ones that were immediately obvious. But the longer I am here and this management team is here, the more opportunities we see. We think that is goodness because it makes it easier for customers to do business with and easier, frankly, for employees to get things done here.’

As to how the job cuts could affect employee morale, Whitman said that ’no company likes to decrease the workforce and we recognize it is difficult for employees.’ That said, she stressed that HP’s employees ’live it every single day’ and understand ’the turnaround we are in, everyone understands the market realities, everyone understands the need to create financial capacity to invest in innovation, which will be our point of difference."

’I don’t think anyone likes this but I think actually we have done a good job of explaining where we are at the turnaround, what the strategy is and what is going to be required to get HP to where we all want it to be in the industry,’ said Whitman.

PUBLISHED MAY 22, 2014