Hewlett-Packard CEO Meg Whitman says recovery is still in the distance for the ailing technology giant.
Her announcement that up to 16,000 jobs will be cut by the end of 2014 comes after 34,000 workers lost their jobs in 2012 as part of restructuring. Whitman says HP will invest money in research and development, including 3D printing and cloud printing.
Bloomberg News’ Michael Regan tells Here & Now’s Jeremy Hobson about the company’s business plan and what it needs to do to compete with its rivals.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson.
ROBIN YOUNG, HOST:
I'm Robin Young. It's HERE AND NOW. Bet you haven't heard this one yet: A pope, a rabbi and a Muslim cleric walk into the Holy Land. Pope Francis embarks on a Middle East trip, bringing his friends from other faiths as olive branches. But what are the serious issues that will be raised?
HOBSON: See, you're starting off a Friday hour with a joke. That's very good.
YOUNG: It's a Friday.
HOBSON: It is Friday. But first let's get to Hewlett-Packard, which announced today that it will lay off as many as 16,000 workers by the end of this year. That is in addition to the 34,000 jobs HP announced it would cut back in 2012, when CEO Meg Whitman said she wanted to restructure the company.
Despite the layoffs, Whitman said today she is confident about the future of HP. Michael Regan is editor-at-large for Bloomberg News, and he joins us now from New York to discuss. Mike, welcome.
MICHAEL REGAN: Oh thanks, Jeremy, thanks for having me.
HOBSON: Well, if you add these 16,000 jobs to the 34,00 jobs that the announcement was made that they would be cut two years ago, that's 50,000 people being laid off from HP. We looked it up. That's the population of Palm Desert, California. How does that compare to the overall workforce at HP?
REGAN: Well, it's a giant company, about 318,000 employees. So this latest batch of job cuts at 16,000, that's about five percent of the workforce, so basically a pretty significant cut. You know, when companies cut jobs like this, I mean that, five percent of the workforce is noticeable, it's certainly - you know, with over 300,000 employees, it's not maybe as huge as it sounds to a - you know, would compare to a smaller company, but five percent of the workforce is something that, you know, Wall Street's certainly going to take note of.
HOBSON: And why are they making these cuts because HP just posted an 18 percent rise in profits for the second quarter of this year.
REGAN: Right, for the - so the second quarter they had decent earnings growth. Overall, though, the trends are negative for them. They're basically about, you know, in the third year of a decline in sales. So obviously the job cuts are meant to - if your sales are declining, the only way to boost profit, obviously, then is to cut costs. So that's why all the job cuts.
You know, but overall the trends are down. They're forecast to have a decrease in earnings for the full year for a third straight year and a sales decrease for a third straight year. So it's, you know, a solid quarter in earnings, but yet, you know, belies a bigger trend of, you know, decreases in both sales and earnings for HP.
HOBSON: Well, you say the only way to turn things around would be to cut jobs. You could also increase demand, which I guess would mean changing up the kinds of products that you're making. What is HP known for right now? What are its big sellers?
REGAN: Well, you know, obviously traditionally their biggest products have been printers, laptops, PCs and servers. And really all of those lines of business are in - under tremendous pressure right now, starting with PCs and laptops. Obviously a lot of people are switching to just smartphones and tablets now, especially in emerging markets, where a lot of the growth for companies like this comes from.
You know, they're affluent enough now in many emerging markets to, say, afford a cell phone, an iPhone and maybe a tablet, one or the other, but really, you know, not enough affluence there to buy a laptop. And in America, you know, everyone's on their phone more than their computer.
REGAN: They're really not - people aren't printing out as much as they used to, either. So that core business is under threat. The other business, servers, is under a really big threat from cloud computing. You know, HP formerly, you know, their business is to sell you the server so that you can store all your data yourself and have, you know, customers access the data right off of your server from the Internet.
The big shift over the last few years has been to put it on a cloud where basically companies are renting space on a server, and consumers a lot of times aren't even buying any Web applications. They're renting them over the cloud, too. So that's a big, you know, all three of those main business lines are really under a lot of competition from, you know, tablets and cloud computing.
HOBSON: Well, today on CNBC, Meg Whitman was defending what she is doing. She says HP is a product of many acquisitions, which weren't handled efficiently, and that this move is going to be good for customers in the end. Let's listen to her on CNBC this morning.
MEG WHITMAN: Our customers still tell us we're a little bit difficult to do business with. We don't make decisions as quickly as we should. We need to have speed and agility. We need to be nimble in what is an enormously rapidly changing marketplace.
HOBSON: Mike, Meg Whitman has been on the job for almost three years now. Is her plan working?
REGAN: Well, you know, if you just want to judge from the stock price, now the stock price is up about 49 percent from the day she took over as CEO, which sounds great on paper, but compare that to the S&P500 itself is up 68 percent, so, you know, 20 percentage points more. Technology companies as a whole in the S&P500 are up collectively about 59 percent. So they're beating them, too.
So she's, you know, doing enough to keep her job, I think, but certainly she really needs to restore the company to growth in sales to really, you know, cement this turnaround that she's working on.
HOBSON: Not just cut her way to growth.
REGAN: Right, cutting your way to growth is a very difficult thing to do. I mean, obviously you get to a point where, you know, you can only cut so much more. So she really needs to get that top-line revenue and sales number growing in order to really, you know, shore up the company in the long term.
HOBSON: One more thing I want to ask you about. She says she's putting a lot of money into research and development, including 3-D printing for businesses. Here she is on CNBC.
WHITMAN: We'll announce a 3-D printing technology at the end of this year, and we think there's a real opportunity here. But this is an acorn that we're planting that will become an oak tree in the future.
HOBSON: So does a company like HP that was known for printers turn into a 3-D printing company?
REGAN: You know, it's an interesting gamble. I think along with cloud computing, 3-D printing, there are so many startup firms that are so far ahead of them now that, you know, perhaps maybe they should buy one of them or, you know, really invest heavily. But it's tough to come from that far behind with new businesses like that.
HOBSON: Michael Regan, editor-at-large for Bloomberg News, talking to us about HP, which announced today it is cutting 16,000 more jobs. Mike, thanks so much.
REGAN: Thank you. Transcript provided by NPR, Copyright NPR.