HP Restructures
You may stop holding your breath (or
drop the other shoe). HP’s
new CEO Mark Hurd has announced how HP will be restructured to
streamline the company and reduce costs.
Mainly it’s about doing some reorganizing and a lot of
employee cutting.
HP will cut back 14,500 employees over
the next six quarters, mainly in administration and support.
It will cut layers out of management and eliminate a
solutions group by putting its functions back into other
organizations. This
is designed to save $1.9 billion per year when fully implemented
(and about $600 million in the first year).
HP hopes that by offering a retirement incentive program
and doing the cuts over a longer period of time, the number of
employees who will actually be asked to leave can be minimized.
It should also minimize any customer impact.
HP is also making some changes to its
pension plan (making it more in line with industry standards,
moving to 401-K style plans rather than defined benefit ones),
which will save $300 million a year.
HP will protect current retirees and employees close to
retirement from these changes.
We were disappointed by two things in
all this. One we
heard the next day and one we didn’t hear at all.
There was another news release after the
initial restructuring one, noting that HP would also be doing save
cost-cuts at the HP Labs. One of the projects that will go will be Alan Kay’s
Emerging Software project. We
don’t know whether HP was getting anything out of it – or
whether they would ever get anything out of it – but Dr. Kay is
an industry pioneer and HP needs to look as innovative as it can
right now, so we weren’t sure this was the right message to
send. Of course,
money is a finite good, and if cutting a few projects meant saving
many others, that could be exactly the right decision.
We’d love to hear about the ones that made the cut.
We were also disappointed that we
didn’t hear more about plans beyond cost cutting.
Maureen O’Gara, Editor of Client
Server News, and a seasoned and savvy journalist, interviewed
Scott McNealy of Sun about the HP cuts, asking him to compare them
to headcount cuts at Sun a few years ago.
He said he viewed the HP cuts as tactical not strategic.
Maureen notes that although Sun has gone from about 43,000
to about 30,000 employees, much deeper cuts than the 10% just
announced at HP, it kept Sun going but they didn’t pull “it
out of the quicksand it fell in.”
(ClientServer News #604, July 25, 2005).
Like Maureen, we’re looking for some
strategy to drive increased revenues and market share.
Maybe that comes next.
We do note, with interest, that HP will
continue to has a broad portfolio, right across the technology
industry, ignoring advice (from the Street and others) to spin off
its printer or PC business or, alternatively, to get rid of its
expensive and not-very-profitable Enterprise group. The Board is believed to want to continue on an inclusive
strategy (similar to IBM’s decision under Lou Gerstner) and Mark
Hurd seems to have signed on to implement it.
That means a lot of this plan will
depend not on strategy, but rather on execution.
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