HP: Not If or When, But How Many?

Rumors continue to swirl of imminent, massive layoffs at computer maker Hewlett-Packard .

While analysts and numerous business reporters have built a drumbeat of speculation over how big the layoffs will be (anywhere from 10,000 to 25,000), HP won’t officially confirm any layoffs announcement. “It’s just rumor and speculation at this point,” said Alexa Hanes, HP spokeswoman for corporate affairs. HP has about 150,000 employees worldwide.

However, the Silicon Valley-based landmark said in a June filing with the Securities and Exchange Commission that as many as 3,000 employee cuts would be made worldwide by this October. That number included 1,600 layoffs earlier in the year. Now the buzz across the computing world is of a much larger restructuring under the leadership of new CEO Mark Hurd, known for cost-cutting at his previous employer NCR .

“Hurd’s past history suggests he is very willing to take large-scale cost-cutting moves,” said Gordon Haff, senior analyst at Illuminata. “The patterns of the layoffs, where the cuts are made, will give some insight into what areas HP may be looking to refocus or defocus their resources.”

While HP faces stiff competition on many fronts, analysts expects staff cutbacks to be widespread across different divisions of the company. “Looking at it strictly from the financials, they have to reduce expenses, and in this case, cutting costs means losing people,” said Martin Reynolds, a vice president at Gartner and long-time Silicon Valley analyst. Reynolds said he thinks HP has to cut about 15,000 staffers to stay competitive.

“In the businesses they are in, like PCs and printers, though not ink, these are high-volume, low-margin products,” said Reynolds. “They have to have a lower cost of operations to compete with Dell and others.”

Once the envy of businesses both within and beyond the tech sector for its commitment to its employees, HP has faced fierce competition domestically and overseas. Four years ago, under the aegis of then-CEO Carly Fiorina, HP let go 6,000 employees for what at the time was expected to be an annual cost savings of some $500 million. More recently, HP’s controversial merger with Compaq led to further staffing cuts. But while HP’s share of the PC market improved, the merger hasn’t paid the bottom line dividends that Fiorina, architect of the deal, hoped for.

Reynolds speculated that more savings could be wrung out of the Compaq deal. “It seems to me they still have buildings where Compaq was based in Houston, and HP has plenty of real estate in Cupertino,” said Reynolds. “They could consider closing an entire campus.”

Another disappointment for HP has been the partnership with Intel to develop the Itanium processor, though analyst Haff thinks it’s gone better than most observers give it credit for.

“Itanium’s been a mixed bag, but it’s been a very good replacement for HP’s PA-RISC and Alpha processors,” said Haff. “What Itanium isn’t, to HP’s and Intel’s dismay, is the dominant processor of the 64-bit world that Intel’s processors have been in the 32-bit world. It’s a good chip, but not a de facto industry standard.”

As for the layoffs, Reynolds thinks it good that Hurd may take the painful step of a single large restructuring that could end, for at least the near term, the series of layoffs that have beset HP in recent years. “Employees are trying to do their jobs, but they also fear that tap on the shoulder that says they’re next,” said Reynolds.

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