Analysts are not convinced of HP′s reform drive | Business| Economy and finance news from a German perspective | DW | 24.05.2012
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Analysts are not convinced of HP's reform drive

The world's largest producer of personal computers, Hewlett-Packard, has announced a major restructuring scheme which involves massive layoffs. But market players doubt the reforms can save the company.

US Silicon Valley pioneer Hewlett-Packard (HP) announced on Wednesday that it was planning to cut 27,000 jobs by the fall of 2014 in a major restructuring initiative. The leading maker of personal computers would shed eight percent of its global workforce.

"The workforce cuts will include an early retirement program and will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate," HP said in a statement.

The announcement came after HP reported a 31-percent drop in profits in its second fiscal quarter to $1.6 billion (1.27 billion euros). Revenues in the same period fell by 3.0 percent from a year ago to $30.7 billion.

Like its main rival Dell, Hewlett-Packard has been suffering from the slow growth in personal computer sales, as customers increasingly opt for Apple iPads and other tablet devices. But that's a sector in which neither Dell nor HP is strong.

Pundits unconvinced

Market players doubt that the most recent reform and restructuring announcements will change the picture for the better as they question the direction of the company's development.

"Previous cuts have done little to improve HP's competitive position or reduce its reliance on declining or troubled businesses," Deutsche Bank said in a statement. Bernstein Research analysts argued that investors had long viewed HP as a broken company.

But that's a view Hewlett-Packard CEO Meg Whitman refuses to subscribe to. She pointed to savings of between $3.0 and $3.5 billion by the end of the 2014 fiscal year, adding that the bulk of it would be reinvested into areas such as cloud computing, data security and "other segments that offer attractive growth potential."

hg/mll (Reuters, AFP, dpa)