Black Monday - HP's job cuts only made the banking doom and gloom worse.
I am not a fan of big layoffs. To me they conjure weakness - and images of our auto and airline industries. But Wall Street seems to expect them and companies play along.
While there are plenty of analysts who will parse what this means to HP stock, I am more interested in what this means to HP/EDS buyers.
As I wrote here, the strength of both HP and EDS is still more in infrastructure outsourcing, less application or business process outsourcing. Those markets are more capital than labor intensive. As we move in to the new world and economics of cloud computing will the job cuts help HP compete better with amazon's storage pricing of 25c a gb a month?
HP is planning to hire about half of that workforce back - presumably in low cost countries. I would like to see how it does better than what it and EDS have done over the last few years. EDS acquired MphasiS almost 3 years ago, and HP has had labor pools in China, India and E. Europe for a while. In proposals I have reviewed from both, the global delivery model is choppy - and the economics uncompetitive. Let's not forget EDS was the first Western firm to "discover India" as far back as 1996 and blew that first-mover advantage. Why will it be different this time around?
Mark Hurd has had a golden touch at HP, so I imagine the job cuts are just the beginning of major transformation of the services business. I have a feeling it will consume much of his attention for the next few years. Even with EDS, HP will only have a 6% market share in the fragmented services market. Very different from the hardware and software market HP is doing well in.
Should be interesting to watch even as I try to forget how much the cuts remind me of US airlines and auto companies.
