Hewlett-Packard Is Counting on Organization Change to Boost Revenue Growth

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Hewlett-Packard Case Study Analysis

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Hewlett-Packard Case Study Analysis

Hewlett-Packard Is Counting on Organization Change to Boost Revenue Growth

Meg Whitman became CEO of Hewlett-Packard Co. (HP) in 2011. Since the time HP’s revenue peaked in 2011 at $127 billion, it has dropped every subsequent year. On the positive side, the company had two consecutive quarters of growth in 2014. HP also is trying to right-size and reduce costs by planning to lay off 16,000 employees. HP earlier decided to lay off 34,000 people, resulting in a total reduction of 50,000 employees.100

Whitman described the job cuts “as an opportunity to streamline the company further and make it more nim- ble. An expected $1 billion in cost savings in fiscal 2016 would allow HP to invest in new technologies and skills to revive growth.” Others, like UBS analyst Steven Milunovich, believe that these job cuts will erode employee morale and may lead to increased turnover.101

“But fixing the world’s biggest tech company—with $120 billion in annual revenues and 330,000 employees— is a herculean task. Bloated by more than 70 acquisitions in the past 15 years, HP isn’t just sprawling and stalled out; it may actually be running in reverse.”102

Whitman decided to change the organizational structure to fuel growth. She created two clusters of businesses. One focuses on corporate technology customers. This group, which sells servers, storage, and networking, delivered 43% of the company’s overall operating profits according to Forbes. Unfortunately, the software and services that accompany all this hardware have not been as successful. HP tried to build the software side of the business via acquisitions, which according to Forbes have not been very successful. The magazine noted that “when it comes to software acquisitions, Autonomy [HP’s enterprise software company] was merely the most high-profit misstep. All told, over the past decade HP squandered nearly $19 billion to buy myriad outfits that contribute only 7% to overall profit. The services unit, which staffs other companies’ tech projects, is barely at breakeven.”103 HP is currently “looking for small to midsize acquisition candidates in cloud computing, security, and analytics software.”104

 

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