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 user 2010-02-22 at 11:07:58 am Views: 32
  • #23645

    First quarter net revenue of $31.2 billion, up 8%, or $2.4 billion, from a year earlier
    HP profit jumps 25 pct, company raises outlook

    SAN JOSE, Calif. – Hewlett-Packard Co.’s profit swelled 25 percent in the latest quarter because of cost-cutting and a stronger showing from its personal-computer division.

    Revenue was up in most of the technology company’s major divisions and HP raised its 2010 outlook, citing “accelerating market momentum.”The numbers show that technology spending by corporations is creaking back to life. HP is a bellwether because it is the world’s biggest maker of PCs and printers. And HP’s latest results are the first from a major tech company to include the full month of January.

    HP’s services division stumbled, however. Revenue fell even as the division got more profitable, a difference likely explained by CEO Mark Hurd’s aggressive cost cuts to that business. Services represent HP’s latest challenge against rival IBM Corp. and are a cornerstone of a major makeover for HP.

    HP said after the market closed Wednesday that its net income was $2.3 billion, or 96 cents per share, for the three months ended Jan. 31. In the same period last year, it earned $1.9 billion, or 75 cents per share.

    Excluding one-time items, HP said it would have earned $1.10 per share. That beat the average estimate of $1.06 per share, according to analysts surveyed by Thomson Reuters.

    Revenue jumped 8 percent to $31.2 billion, also topping analyst forecasts for $30.0 billion.

    HP’s 2010 forecast now calls for $121.5 billion to $122.5 billion in revenue, exceeding the $120 billion analysts were expecting.

    Net income is expected to be $3.79 per share to $3.86 per share, or $4.37 per share to $4.44 per share excluding charges. Analysts were expecting $4.37 per share, excluding charges.HP shares rose 50 cents, 1 percent, to $50.65 in after-hours trading.

     Hewlett-Packard’s massive job cuts over the past decade: 75,505.

    First, the stray thoughts.
    What I still find amazing is the headcount which stands at 304,000 at the end of the last fiscal year, even after 75,505 cuts. HP made the point that it has dramatically expanded headcount since 2000 when it only had 88,000 employees. That’s true. But one important distinction that I’d make is this: The company hasn’t created any net new jobs.

    Let me explain. Among others, the company has acquired Compaq, Mercury Interactive, Opsware and EDS over the past decade. If you take these companies’ pre-HP employment and added it to the HP headcount of 88,000, then you’d get roughly the same number of jobs today. The main difference is that those jobs are under one corporate shell, rather than several.Yes, that means HP is a dramatically larger company. But in terms of the world economy, there has neither been a sizable net gain or loss of jobs.

    Those 75,505 cuts represent a dramatic level of churn. While HP was pushing employees out one door, it was busy waving them in another. Granted, it was getting rid of some overlap and duplication. But if there was really any savings, where did they come from? Moving jobs overseas? Hiring people who earned less? We don’t know.

    One thing that came through in emails from HP employees, former and current, is that they feel morale is slow, and there is constant anxiety created by the drumbeat of cuts. One sample comment from a former HP employee: “If you are going to use HP as a case study, then the real issues is what happens to the people who are left at the company. It turns out lay offs can be capricious and arbitrary. If you are in the wrong place at the wrong time you are gone, regardless of performance. The objective is to keep the workforce young, hungry and a bit n the ruthless side. There are no longer any serious rewards for longevity, except for a few senior executives. The company really does not want people to work there very long. It is a little like the Survivor TV show. the most uncaring and cold-blooded survive and the rest are expected to go. That attitude permeates our whole society today. Think about, Donald Trump gets great headlines for saying, “You’re fired.” “

    Some commenters also noted that the HP I wrote about was the product of the spinoff of HP and Agilent in the late 1990s, a move that also led to some job cuts.
    As a side note, I recommend “The Case Against Layoffs,” an article just published by Stanford professor Jeffrey Pfeffer in Newsweek:  “…over the last two decades layoffs have become an increasingly common part of corporate life—in good times as well as bad. Companies now routinely cut workers even when profits are rising.”

    Regarding HP, there’s still one big legitimate question is this: Was it worth it?
    That’s a hard one to answer. Yes, HP is number one in several areas. But this got me thinking about HP’s overall strategy over the past decade, driven by acquisitions and layoffs. Here are a few questions I have, but haven’t had time to calculate the answers:

        * How much has HP’s revenue grown above what HP and its four big acquisitions would have generated separately?
        * How much would profits have grown by the same measure?
        * How many more shares has HP issued as part of the acquisitions?

     How much has that diluted shareholder value? And how much has HP spent on stock buybacks to reduce dilution?I think much of this data is out there, it’ll just take time to dig through the filings and pull it together. When I get around to it, of course, I’ll share it here.I’d also note that right in our backyard, we have two alternative examples of how to reinvent a company in this era. The first is Oracle, which has been an acquisition monster, but has conducted far fewer layoffs than HP (I’m going to tally that up). The decision to cut “only” 1,000 from Sun Micrsosystems is a good example, a low number given that I and many analysts expected the number of cuts to be over 10,000.And then there’s Apple. They are a great example of how to innovate your way to growth. Compare Apple’s track record to that of HP’s. Through all the acquisitions and growth, there’s no major innovation that people would associate with HP over the past 10 years. New products, sure. But nothing revolutionary.Finally, I had all but forgotten about HP’s deal to buy 3Com. But it looks like that will close soon. We’ll have to wait to see how many job cuts follow.