HP has announced plans to cut 27,000 workers – nearly 8% of its workforce – as it looks to save $3.5bn a year. The company also revealed a 3% slump in revenue and a 30% decline in quarterly profit.
One of the casualties is Mike Lynch, who is leaving less than a year after selling Autonomy to HP in a hugely controversial $11bn deal. New CEO Meg Whitman blamed Autonomy’s poor performance during the quarter, particularly a decline in license revenue, for the change. Lynch will be replaced by Bill Veghte, HP’s chief strategy officer.
The culling of 27,000 HP workers is expected to be completed by the end of fiscal year 2014 and should generated annual savings of $3bn to $3.5bn, HP said. It was affected all aspects of the business.
"While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders," Whitman said in a statement.
However she added in an interview that the cuts are, "quite different from the cost-cutting that Mark Hurd undertook. This is about fundamental business-process re-engineering. [Layoffs] adversely impact people’s lives, but in this case, they are absolutely critical to the long-term health of the company. This is broad based [and] by design, it will touch all of HP."
Net revenue for the second quarter came in at $30.7bn, down 2.8% from $31.6bn a year ago. Profit slumped from $2.3bn a year ago to $1.6bn, a fall of 30.4%.
HP’s personal systems group (PSG) – the PC division former CEO Leo Apotheker wanted to dump – remained flat for the year, pulling in second quarter revenue of $9.4bn. Operating margin there remained at 5.5%. An increase of 4% in commercial revenue, meaning sales to businesses, was offset by a 3% decline in consumer sales.
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Imaging and Printing Group (IPG) revenue declined 10% year over year while Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year. Revenue from services dipped by 1%.
The results closely echo yesterday’s warning from Dell about its struggling business.
Revenue from software – which is where Apotheker wanted to focus the company before being dumped in September last year – was up 22%. Software revenue was driven by 7% license growth, 17% support growth, and 72% growth in services.
These figures include results from Autonomy but HP said "a significant decline in license revenue" was unacceptable and Lynch has paid the price. A strongly-worded statement said Veghte will step up to, "help develop the right processes and discipline to scale Autonomy and fulfil its promise." HP still expects big things from Autonomy, particularly in the cloud space.
"License revenue was disappointing, sales execution was a challenge and big deals were taking longer to close," at Autonomy, Cathie Lesjak, HP’s finance director, told analysts.
