HP Trims Workforce in a Bid to Boost Profits

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Meg Whitman has been the CEO of HP for six months now and she’s clearly not just sitting around waiting for things to happen. HP reported second quarter fiscal 2012 results late Wednesday that were in line with the company’s expectations. In order to drive future growth, HP is reducing its workforce and replacing leadership within its Autonomy business unit.

For the quarter, HP reported net revenue of $30.7 billion for a 3 percent year-over-year decline. Net Earnings were reported at $1.6 Billion, for a 31 percent year-over-year decline. The year over year declines for the second quarter were an improvement over the declines reported by HP for their first quarter results back in February.

“Overall, I feel cautiously optimistic coming out of Q2,” Whitman said. “Our results appear to be stabilizing and while I wouldn’t say we turned the corner, we are making progress.”

Whitman noted that HP’sguidance for second quarter non-GAAP diluted EPS was $0.88 to $0.91, and they delivered $0.98, beating the high end of their own outlook by $0.07 a share on revenues of $30.7 billion.

“While earnings and revenues were both down over the prior-year period, the trajectory of the decline began to flatten in Q2, which is encouraging,” Whitman said.

Part of Whitman’s plan for an HP turnaround involves restructuring the operations of the company. The most impactful part of that restructuring is a workforce reduction of 27,000 HP employees by the end of 2014. The employee layoffs will save HP approximately $3 billion to $3.5 billion by their fiscal year 2014.

“Workforce reductions are never easy,” Whitman said. “They adversely impact people’s lives, but in this case, they’re absolutely critical for the long-term health of the company.”

Whitman stressed that HP’s restructuring is about better aligning HP’s cost structure to its revenue portfolio.

“We’ve got to position the company to take advantage of some of the biggest shifts that I’ve seen in technology in my 30-year career in business,” Whitman said. “And then we’ve got to streamline our operating model.”

Results across HP’s lines of business varied somewhat during the second quarter. The Personal Systems Group reported revenue of $9.5 billion in the quarter, flat year-over-year, Services delivered revenue of $8.8 billion, down 1 percent for the year, while the Imaging and Printing business had net revenue of $6.1 billion, down 10 percent year-over-year.

HP’s Enterprise Servers, Storage and Networking business reported revenue of $5.2 billion for a 6 percent year-over-year decline. A bright spot for HP was its Software unit which reported revenue of $970 million for a 22 percent year-over-year gain.

Not all of HP’s Software business had a good quarter. HP acquired Autonomy for $10 billion in 2011 and it has struggled ever since. As a result of the poor quarter, Mike Lynch, Autonomy’s Founder and Executive Vice President for Information Management is leaving the company and Bill Veghte, HP’s Chief Strategy Officer and Executive Vice President of HP Software, will step in to lead Autonomy

Whitman explained that when Autonomy turned in disappointing results, HP did a fairly deep dive to understand what had happened.

“In my view, this is not the product as Autonomy is a terrific product,” Whitman said. “It’s not the market. There is an enormous demand for Autonomy and it’s not the competition.”

Instead what Whitman sees as the problem is an operational scaling one, where Autonomy needs help to grow the business.

“We need to put in some sales ops processes, we need to put in better interface into HP in terms of how Autonomy interfaces with our Services business as well as our Service, Storage and Networking business, and we need a new organizational structure to support a $1 billion-plus company,” Whitman said.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.