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January 03, 2014

Happy New Year, HP Employees. Now You're Fired?

What a way to start the New Year, knowing there’s a decent chance you’ll be fired before the year is out.

HP didn’t exactly send its PR minions to tell this tale. Instead it made the revelation in an SEC (News - Alert) filing. With the new 5,000 pink slips, the total number of HP workers laid off will hit 34,000 – that’s a decent-sized town.

“Due to continued market and business pressures, as of October 31, 2013, HP expects to eliminate an additional 15 percent of those 29,000 positions, or a total of approximately 34,000 positions, and to record an additional 15 percent of that $3.6 billion in total costs, or approximately $4.1 billion in aggregate charges. HP expects to record these charges through the end of HP’s 2014 fiscal year as the accounting recognition,” HP said.

HP may not have much of a choice, of course. The company ultimately answers to Wall Street , so these cost cutting moves are often imperative. But the company faces a more fundamental issue: It assimilated two huge legacy companies in the form of DEC and Compaq, and even many years later are still saddled with the responsibility to support these old customers.

At the same time that HP absorbed thousands upon thousands of workers, the market was shifting under its feet. First the PC market became pure commodity, and then the same thing happened to the server business. Adding insult to injury, the move to the cloud was best made by the most nimble companies, startups, Amazon, Google (News - Alert), and even Microsoft (which has made a credible well-rounded play).

Tough Challenge

HP is a fine company with many terrific technologies. But now it has to find a new central meaning for its existence. IBM is mostly a services company, and Dell (News - Alert) is still a go-to company for data center infrastructure. However, neither of these outfits is guaranteed to return to their glory days.

While the layoffs will surely rub employees the wrong way, many will be alarmed by reports that workers in India will be largely spared. In an interview last year, HP CEO Meg Whitman said of India “We not only have all our business units here, but also our R&D and back office.”

Indeed, not all big computer companies survive. Just look at Sun Microsystems, whose technology is now largely lost in the Oracle (News - Alert) portfolio.

Edited by Blaise McNamee

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