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 user 2010-02-22 at 11:09:58 am Views: 37
  • #23401

    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 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.

    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

    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.


    massive job cuts over the past decade: 75,505.

    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.
    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

     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.