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Hewlett-Packard's 27,000 layoffs: Are they actually good news?
The market applauds the company's monster cutbacks, which are part of a broad campaign by CEO Meg Whitman to turn the struggling computer giant around
 
With Meg Whitman at the help, Hewlett-Packard is shedding 27,000 jobs, which will save the company as much as $3.5 billion a year.
With Meg Whitman at the help, Hewlett-Packard is shedding 27,000 jobs, which will save the company as much as $3.5 billion a year.
Imaginechina/Corbis

This week, Hewlett-Packard, the world's largest maker of personal computers, announced that it was shedding 27,000 jobs, or about 8 percent of its workforce, in a bid to cut costs and make the once-dominant company competitive in the smartphone era. The stock market took kindly to the announcement, in which H-P also reported a better-than-expected quarterly profit of $1.6 billion, sending its share price up by 9 percent in after-hours trading. Do the layoffs signal better days for H-P?

Yes. H-P is on the upswing: The company's revenue was strong, and it "delivered another pleasant surprise by offering a forecast that raised hopes that H-P may be poised to bounce back," says Michael Liedtke of The Associated Press. The layoffs will save the company as much as $3.5 billion a year, and that cash can now go toward shifting more of H-P's software services to a "cloud-computing" model, in which programs are delivered online. That's all for the best, since H-P's lagging efforts in cloud-computing are partly to blame for its decline.
"HP's missteps culminate in loss of 27,000 jobs"

But it still looks like a dinosaur: H-P is still struggling to keep up as consumers shift from conventional computers to tablets and smartphones, says Quentin Hardy at The New York Times. While its emphasis on cloud-computing is a good start, the rise of the iPhone and iPad has "made many older products unattractive." It will still be quite a challenge for H-P — which continues to rely on personal computers and printers for revenue — to get back in consumers' good graces.
"As computing changes, Hewlett-Packard struggles to follow"

And hasn't proved that it can deliver: "Don't get too excited" about H-P's better-than-expected report, says Antoine Gara at The Street. While embracing cloud-computing could offset its weakness in the personal computer market, H-P's attempts to make money from new software have largely floundered. For instance, H-P has big hopes for Autonomy, a software analytics company it bought last year for $11 billion, but so far, Autonomy has been performing poorly. This company is critical for H-P in the coming years, and Whitman has yet to prove that she can make it work.
"Whitman's H-P restructuring hinges on Autonomy deal"

 

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