HP’s Whitman to Shed More Light on the Future, Including Job Cuts, Today
Hewlett-Packard will report its quarterly earnings today after the close of regular trading in New York, and there’s a lot riding on what its senior executives, especially CEO Meg Whitman, will have to say.
The consensus among Wall Street analysts calls for HP to report sales of $29.92 billion and a per-share profit of 91 cents. And, for the most part, analysts are expecting HP’s results to be in line with expectations, if maybe a little light on sales.
One possible curveball, however, is Europe. Given HP’s exposure to the faltering markets on that continent, about which Dell complained in its earnings report yesterday, HP could conceivably see its results hurt more by Europe than by Dell.
Europe accounts for 37 percent of HP’s revenue, making it the most heavily exposed there among the large IT vendors. “The increasing uncertainty and resulting macro weakness in Europe will likely act as an ongoing headwind to growth,” wrote analyst Chris Whitmore of Deutsche Bank Securities in a note to clients Tuesday.
But the big item on the agenda will be HP’s plans for restructuring, and how many jobs may be lost. As AllThingsD reported last week, HP is contemplating a restructuring that could see as many as 30,000 jobs eliminated, including 5,000 through voluntary retirements. What’s unclear is over what length of time these jobs will go — I’ve been told by sources that this is a key detail, and it is likely to be a fairly long period of time.
The reductions would be the latest in a long, painful sequence of cuts for HP that began years ago. Whitmore notes that HP chopped 50,000 jobs over the course of five years under the tenure of former CEO Mark Hurd. “We suspect HP will position this cost cutting as ‘cut to reinvest’ — an interesting strategy considering HP has been restructuring for the past decade,” Whitmore writes.
Whatever restructuring Whitman puts on the table, Whitmore expects it will help HP maintain its prior guidance — it expects to finish the year with a per-share profit north of $4.00 — but it’s still not going to be easy. Summer PC demand is expected to be soft, and the lack of a tablet strategy isn’t helping. Demand for corporate PCs will likely be a rare bright spot, but just barely.
In printers, the relatively weak results of printer concerns Canon and Lexmark don’t exactly imbue the market with confidence that the trend of sliding profits and sales in HP’s printer operation, recently combined with the Personal Systems Group in a sweeping reorganization announced last month, is anywhere close to being reversed.
One thing to watch for — and something about which Whitman has hinted in the past — is SKU reduction. An SKU is industry lingo for “stock-keeping unit,” and it refers to specific models and makes and packages of a given product. Consumer printers — and, in fact, printers in general — would be an obvious place to cut back on the number of models offered to the market, and it would be perfectly in line with Whitman’s prior messages emphasizing simplicity and streamlining HP’s approach to the market. While I don’t expect Whitman to go on at length about this subject, it’s the sort of thing she may touch on as she hones the “simplicity” message.
What not to expect: One big bomb dropped all at once, outlining the sum total of Whitman’s long-term strategy for HP — one she has already admitted will take a long time to implement. The fact is, it’s a big job, probably one of the biggest in all of the corporate world, and so it’s necessarily coming out in pieces. Today’s piece will be a big one.