What HP's Meg Whitman must do now

May 24, 2012: 11:25 AM ET

A battered HP announced a multi-year restructuring that includes 27,000 layoffs. Here are the new CEO's next steps.

meg_whitmanFORTUNE -- Meg Whitman might have the toughest job in Silicon Valley -- fixing Hewlett-Packard (HPQ). The once-leading tech behemoth has struggled to find its way for years (for more on HP's troubled history, check out James Bandler's recent piece in Fortune). But Whitman is determined to turn things around.

On Wednesday, during an earnings call with investors, the new CEO announced she would cut 27,000 jobs over the next couple of years in an effort to "streamline our operations, improve our processes, and remove complexity from our business." Of course, that still leaves a whopping 322,600 employees worldwide, not to mention a huge and complicated line of products that are no longer as coveted as they used to be (think printers and PCs in a world of Facebooks (FB) and Apple (AAPL) iPads). In other words, the job cuts don't do much to address HP's core problems. So what can Whitman do to get the company headed in the right direction? Fortune asked a handful of Silicon Valley insiders -- CEOs, analysts, management experts and former HP execs -- to weigh in.

Shaw Wu, analyst, Sterne Agee
"As history has proven it is very tough to transform a company. Arguably only IBM (IBM) and Apple have done it successfully and both have faced extinction. But in the near-term, we think the best thing Meg can do is try to clean up the balance sheet. They took on a lot of debt with recent acquisitions including Autonomy. They have $25.5 billion in debt compared to only $8.1 billion in cash as of their last reported January quarter. We think improving this will go a long way with investors."

Robert Sutton, professor of management science and engineering, Stanford University
"I think Meg has the hardest job of any CEO I can think of right now. The company is so large and so diverse that I am not sure it is possible for any single person or time to run it. As one little example, I went to the HP website to figure out which printer I might buy. It seems I have 84 choices. The size of the product line is just one sign that the company has evolved into one that is impossible to manage. As systems grow, wise management is always looking for things to take out -- things that it once needed but now get in the way or that are too complicated or distracting. With Meg's layoffs she may make some progress in this direction."

Frank Slootman, CEO, ServiceNow
"HP needs a culture make over. They need to get that eye of the tiger back, have a mission that is relevant, compelling and uniquely theirs. Instilling a sense of mission and a fighting spirit is job one. Everybody's invading HP's profit sanctuaries, time to develop a chip on the shoulder, and start snapping back."

Former HP exec who declined to be named
"HP needs to figure out if it's a consumer-oriented business or a commercially oriented tech business. Doing both is incredibly hard and the company's too big. Maybe the move Meg has made in combining the PC and printer groups is the first step—you can see the lines beginning to be drawn. She could split the company in two, the PC and printing business and the software, services and compute business. Smaller and simpler is probably better. Apple's proved that you can dominate the world with two dozen SKUs. Walk into a Best Buy and how many different kinds of printers can you buy? I worked there and I couldn't even tell you. This is a company that's bigger than Portugal. It's a big, large complex business. It doesn't need to be."

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About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

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