What HP Layoffs Will Say About Hardware, Software and Services

As Hewlett-Packard (NYSE: HPQ) prepares to cut somewhere between 25,000 to 30,000 HP employees (or roughly 8 percent of HP’s workforce) one thing is clear: HP’s problems are not isolated to any one particular business unit. The company faces clear challenges across its hardware, software and services initiatives — forcing CEO Meg Whitman to make tough choices and perhaps lean even more on channel partners in the days and months ahead.

Hewlett-Packard spent most of 2011 wrestling with its hardware and software strategies, killing WebOS tablets and even considering a PC business unit spin-off before deciding to remain in that market. The turmoil led to former CEO Leo Apotheker’s outster. Now, it appears CEO Whitman has concerns about HP Enterprise Services, where business hasn’t been growing. Numerous published reports suggest HP’s services business, built atop the EDS foundation, could be particularly hard hit by layoffs.

Whitman is expected to discuss the layoff plan when HP announces earnings on May 23.

How deep are HP’s problems? On the one hand, the company remains profitable and a major force in the IT channel. But on the other hand, an 8,000 word expose in Fortune reveals how 10 years of missteps are now undermining HP’s influence in the hardware, software and services markets.

So how can HP pick up the pieces? Perhaps HP needs to get smaller again before it returns to growth. And The VAR Guy isn’t just referring to staff headcount. HP needs fewer, better defined products.

Check HP’s portfolio of PCs and tablets and you’ll find so many options that HP might be creating customer indecision. Meanwhile, rival Lenovo appears ready to take the PC market share crown from HP within the next few quarters or so.

Hopefully, the HP Labs folks are cooking up some new technologies that are disruptive, empowering and just plain old amazing. But The VAR Guy isn’t hearing much out of the HP garage…

Ultimately, Whitman’s top four priorities need to be:

• Calm, focused leadership that replaces HP’s revolving door CEO challenges from the past decade.
• Keeping all family business discussions inside the halls of HP. News and rumor leaks have undermined HP for several years now.
• Buying time and assuring customers that HP has the right mix of products (servers, storage, networking) and services (IT support, consulting, cloud) until the Next Big Opportunity surfaces.
• Rewarding channel partners for their loyalty amid all the HP-related stress the past few years.

HP’s earnings call on May 23 should supply more answers. But will it raise new questions about HP as well? Hmmm…