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May 27, 2014

Does cleaning out HP desks lift its futures?

Migration sites in the 3000 community have a stake in the fortunes of Hewlett-Packard. We're not just talking about the companies that already have made their transition away from MPE and the 3000. The customers who know they're not going to end this decade with a 3000 are watching the vendor's transformation this year, and over the next, too.

Clean-Out-Your-DeskIt's a period when a company that got bloated to more that 340,000 companies will see its workforce cut to below 300,000 when all of the desks are cleaned out. The HP CEO noted that the vendor has been through massive change in the period while HP was cleaning out its HP 3000 desks. During the last decade, Meg Whitman pointed out last week, Compaq, EDS, Automomy, Mercury Interactive, Palm -- all became Hewlett-Packard properties. Whitman isn't divesting these companies, but the company will be shucking off 50 percent more jobs than first planned.

Some rewards arrived in the confidence of the shareholders since the announcement of 16,000 extra layoffs. HP stock is now trading at a 52-week high. It's actually priced at about the same value as the days after Mark Hurd was served walking papers in 2010. Whitman's had to do yeoman work in cost-cutting to keep the balance sheet from bleeding, because there's been no measureable sales growth since all 3000 operations ceased. It's a coincidence, yes, but that's also a marker the 3000 customer can recall easily.

When you're cutting out 50,000 jobs -- the grand total HP will lay off by the end of fiscal 2015 in October of next year -- there's no assured way of retaining key talent. Whitman said during the analyst conference call that everybody in HP has the same experience during these cuts. "Everyone understands the turnaround we're in," she said, "and everyone understands the market realities. I don't think anyone likes this."

These are professionals working for one of the largest computer companies in the world. They know how to keep their heads down in the trenches. But if you're in a position to make a change in your career, a shift away from a company like HP that's producing black ink on its ledger through cuts, you want to engage in work you like -- by moving toward security. In the near term, HP shareholders are betting that security will be attained by the prospect of a $128 billion company becoming nimble, as Whitman vowed last week.

In truth, becoming nimble isn't going to be as important to an HP enterprise customer as becoming innovative. Analysts are identifying cloud computing as the next frontier, one that's already got profitable outposts and the kind of big-name users HP's always counted in its corral. During an interview with NPR on the day after the job cuts rolled out, Michael Regan of Bloomberg News pointed out that most of HP's businesses have either slipped, like printers and PCs, or are under fire.

Servers are under a really big threat from cloud computing. HP formerly, you know, their business was to sell you the server so that you can store all your data yourself and have customers access the data right off of your server from the Internet.

The big shift over the last few years has been to put it on a cloud, where basically companies are renting space on a server, and consumers a lot of times aren't even buying any Web applications. They're renting them over the cloud, too. All three of [HP's] main business lines are really under a lot of competition from tablets and cloud computing.

This isn't good news for any customer whose IT career has been built around server management and application development and maintenance. Something will be replacing those in-house servers at any company that will permit change to overturn its technology strategy.

Cloud computing is a likely bet to replace traditional server architectures at companies using the HP gear. But it's a gamble right now to believe that HP's strength in traditional computing will translate to any dominance in cloud alternatives. IBM and Amazon and Google are farther in front on these offerings. That's especially true for the small to midsize company where an HP 3000 is likely to remain working this year.

During the NPR interview, Regan took note of the good work that's come from Whitman's command of the listing HP ship. But the stock price recovery is actually behind both the Standard & Poors average and the average for technology firms during Whitman's tenure. She's floating desks out the door, but that probably won't be enough to float the growth trend line upward. When extra cuts are needed to keep all those shareholders happy, one drooping branch could be the non-industry standard server business.

Any deeper investment in any HP strategy that relies on catching up with non-standard technology should float away from procurement desks for now.

11:01 PM in Migration, News Outta HP | Permalink

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