HP is about to lay off a massive number of workers, sources tell us, with one business unit, HP Services, to be particularly hard hit.
In 2008, HP spent $13.9 billion on EDS and gave it the name of HP Enterprise Services (HP ES). HP reports earnings on May 23 and HP Services "is projecting a $280 million profit shortfall in FY 2012," one source told us.
CEO Meg Whitman and crew have laid the blame on employee costs such as their salaries. Employees say the problem is one management blunder after another.
"Around March 13, HP had an all-hands employee global webcast where Meg Whitman made a few statements that revealed a complete lack of strategy, and total focus on Band Aid fixes to staunch investor concerns and HP's reputation," one source told us. "The one statement that caught my attention was 'When you have a 10% increase in costs and zero revenue growth, that is no way to stay in business. Services are HP's biggest problem and we must immediately address it.'"
Employees say that the reason HP ES has had no growth is because it's had no leadership.
"HP Services is not growing because there continues to be no investment in: a) talent ; b) new offerings; and c) HP Services is in a constant state of restructuring," a source told us.
An employee that just left the company said: "John Visentin was set up as the vice president of ES by the board of directors and Whitman almost as an afterthought late last year. Since that time, ES has made absolutely no strategic changes in how it is targeting future business and how it must reduce costs. It's a ship without a rudder."
HP has already begun to ax employees. We heard from one worker laid off last month. But the big action is yet to come. HP wants to reduce its workforce by 10-15% between layoffs, early retirement and attrition, a source told us, though that number seemed high to us. Others say 8%, or 25,000 employees, will be cut.
The bigger issue is that these layoffs are being extremely poorly managed, our sources tell us. Employees with high salaries are being targeted, even when that employee is bringing in lots of business, they say. We heard from one ex-worker who took "$20M revenue at a 30+% margin" with him to a new company after getting the pink slip from HP a few weeks ago.
HP is internally discussing selling part of HP ES, known as the Business Process Outsourcing unit, or shuttering it, our sources say. This unit lets big companies hire HP to do tasks such as CRM, HR and payroll, accounting. This is an area that is growing rapidly for other companies. SAP just spent $3.4 billion to acquire SuccessFactors, for instance.
If HP keeps it, it will likely still lay off many workers and send those jobs offshore.
Last quarter, ES reported $8.6 billion in revenue. At the time, it was HP's second largest unit. (The PC unit was the biggest -- and not by much.) HP has since reorganized.
HP could not be reached for comment.
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Are you an HP employee with insight to share? We want to hear it. We are discreet. jbort@jkmperu.com.
