HP considers cutting 25,000 jobs. Why not more?May 18, 2012: 9:39 AM ET
Facebook employees are celebrating. Workers at Hewlett-Packard are wondering whether or not they'll still have a job
FORTUNE -- While Facebook (FB) employees are celebrating, workers at beleaguered Hewlett-Packard (HPQ) are wondering whether or not they'll still have a job a few weeks from now. The Palo Alto, Calif.-based tech behemoth is said to be considering cutting upwards of 25,000 jobs, as reported by Bloomberg on Thursday.
The layoffs could be announced next Wednesday, when HP reports quarterly results. Either way, investors will be looking for more information on new CEO Meg Whitman's restructuring plans. Whitman is in the unenviable position of trying to turn HP around (click here for an in-depth look at what went wrong at the once-venerable company). But while cuts may be necessary, in the long run they won't do much to curtail HP's declining revenues.
HP needs a bold makeover, and perhaps even deeper cuts than the 25,000 layoffs it is reportedly considering (the company has 349,600 employees worldwide). But it just can't decide what it wants to be. Former CEO Leo Apotheker toyed with the idea of spinning off its PC business. But current chief executive Whitman has made it clear that's off the table, at least for now.
Besides a dysfunctional board, scandals and a revolving door of chief executive officers, HP has had to contend with a decreasing demand for printers and computers, its core businesses. The company completely missed the boat on tablets and mobile phones -- not for lack of trying, but for lack of getting it right. And while it's made efforts to increase its enterprise software market share, those revenues still comprise just a tiny percentage of the company's overall sales. Just last week, HP announced a slew of new products, including a line of ultra-thin laptops. But even if these end up selling well, they won't do much to help HP reinvent itself.
MORE: HP's cast of characters
For now, Whitman seems focused on stabilizing the company. Expectations from Wall Street are low, which should make her job just a tiny bit easier. But HP's problems have been building up for years, and employee morale is in a downward spiral. Whitman can trim some of the fat, realign organizations and make other iterative improvements, but there's not much she can do to significantly alter HP's prospects, unless it involves some painful and drastic changes. Even then, it's not clear an IBM-like turnaround would be possible. There's a reason IBM (IBM) is always used as the example for this kind of solution to the classic Innovator's Dilemma -- most other companies haven't succeeded in making such a dramatic change.
Just a few miles away from HP, Facebook is hiring and beefing up its ever-growing staff. It's not perfect, and it will likely make many more mistakes, especially as it faces the scrutiny of Wall Street in the coming years. But it's become the poster-child for innovative, engineering-centric and highly valued Silicon Valley companies -- much like HP used to be.