Investing

A Sign of Recovery in Hewlett-Packard Layoffs

Hewlett-Packard (NYSE: HPQ) has plans to lay off as many as 30,000 people soon. By some estimates that is 8% of its workforce. HP’s CEO Meg Whitman needs to show that she has found substantial inefficiencies in a corporation that markets PCs, printers, IT and tech advice, software and servers for business, to name most of its largest operations. Whitman follows in the footsteps of other tech CEOs who have slashed jobs as the beginning of great turnarounds or as the engines of ongoing success.

Former CEO Market Hurd built his reputation because he was a talented cost cutter. He fired more people than Whitman will with the upcoming cuts. In one move, after HP bought tech consultant EDS, he sacked 24,000 people he deemed redundant. Despite the human damage, he increased HP’s margins and its share price. If it were not for indiscretions, he would still be wielding his axe.

IBM’s (NYSE: IBM) multidecade turnaround and success was built on a weeding out of weak businesses and bolstering of good ones, along with a smattering of smart M&A. Starting with uber-CEO Louis Gerstner, IBM cuts its workforce by tens of thousands. Some observers believe IBM continues to silently let people go as it outsources their jobs to India and other parts of Asia. Not many months ago, IBM’s shares were at an all-time high.

One of the most proficient cost cutters in the tech world is Larry Ellison of Oracle (NASDAQ: ORCL), one of his generation’s great success stories. His serial acquisitions of smaller companies almost always result in elimination of redundant jobs.

Layoffs at weak tech firms may seem cruel and examples of how some people who have jobs today help a company atone for past sins. But they also are often the start of new focus by a CEO with reasonable plans to make his or her company much better, at least financially.

Douglas A. McIntyre

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