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.
(Image credit: 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.

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