Amid 3Q15 Disappointments, HP Keeps Big Plans on the Horizon
(Continued from Prior Part)
New layoffs
On September 15, 2015, The Hewlett-Packard Company (HPQ) announced its financial outlook forHewlett Packard Enterprise for fiscal 2016. In relation to this, Hewlett-Packard (commonly known as HP) announced 25,000–30,000 layoffs as it prepares to bifurcate, effective November 1, 2015. Commenting on the new round of layoffs, HP CEO Meg Whitman blamed rapidly changing technology. The layoffs will primarily target at HP Enterprise Services segment workers.
HP also shared that the percentage of workers employed overseas in low-cost locations is expected to grow to 60% by 2018 from the current 42%.
Layoffs counterbalance HP’s split costs
In its 2Q15 earnings release, HP CEO Meg Whitman stated that the company’s impending split into two separate organizations is expected to cost ~$400–$450 million, which would be “divided equally between the two companies.” The 55,000 jobs HP aims to banish by the end of 2015 is likely to help the company to counterbalance these separation costs.
HP’s initial layoff started in 2012, with a target of 25,000 jobs, but later the figure grew to 55,000. In late August 2015, HP CFO Catherine A. Lesjak stated that the company would cut additional jobs—5% more than the earlier 55,000 layoffs HP had forecast.
Layoffs have recently become the norm in the technology sector. Fiscal 2014 saw leading technology players like Microsoft Corporation (MSFT), IBM (IBM), Symantec (SYMC), and HP announce layoffs as a way to keep costs in check.
If you’re optimistic about HP, you might consider investing in the Technology Select Sector SPDR (XLK), which invests about 1.25% of its holdings in the company.
In the next part of this series, we’ll look at HP’s aims to improve its margins and profitability.
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