Meg Whitman Details Layoffs To HP Employees In Internal Video, Thinks HP Is “Rebuilding Credibility”

Confirming rumors from last week, HP just publicly announced a layoff plan that will result in a reduction of 8% of its workforce. Shortly after releasing the memo to Wall Street, HP CEO Meg Whitman sent a company-wide video message explaining the future of Bill Hewlett and David Packard’s company.

She acknowledges throughout that HP is in trouble, stating in the beginning, “HP’s performance is still not where it needs to be” and “We have a lot of work ahead of us to get HP back on track.” She also explains, a bit comically and perhaps erroneously, that “[HP] is currently rebuilding credibility one quarter at time, and to do that, we need to consistently deliver on what we say.”

Whitman also reaffirmed HP’s commitment to infrastructure, PCs and printing, servers, storage and networking. “This is a differentiating strength for HP and one we can be proud of,” she said in the video.

However, the axe is about to fall throughout HP. Before Whitman attempts to justify the cuts, she explains that HP’s employee count has grown at a pace unsustainable by its low revenue as of late.

“We’re struggling under our own weight,” said Whitman in today’s internal video memo. “And we’ve got to restore a healthy balance in order to return HP to its position as a growing… thriving… innovating… industry leader. That’s what this is all about. And the workforce reduction is only one piece of a comprehensive effort. We see a lot of opportunity to remove complexity, streamline and reduce costs in a number of areas across HP.”

Like previous rumors speculated, HP plans on reinvesting the savings into the company. “We’ll be investing to drive leadership in the three strategic pillars – cloud, security and information optimization. And in each of our businesses, we’ll make investments to stay ahead of customer expectations and market trends.” This is a fresh move for HP who under previous leadership simply used the savings of a smaller company to help the ledger.

In the consumer-focused PC and Printing Group, “we’ll be focused on design, engineering, quality, and generating demand and desire with our customers,” she said. In Enterprise Servers, Storage and Networking (ESSN) “we’ll invest to drive R&D and innovation in our core businesses of servers, storage and networking. In Software, we’ll be investing to speed development across Security, Information and Management Infrastructure for both on-premise IT and in the cloud – with a key focus on software-as-a-service offerings. This will include the extension of Vertica and Autonomy across our entire portfolio. And in Services, we’ll improve processes and build-out capabilities in cloud, security and information. We’ll also be strengthening our industry practices, as well as our service quality and innovation.”

Whitman also detailed that HP is looking to better train their employees while providing a “career development and better tools and support.”

Like most leaders, Whitman ends the video with a reminder to her underlings that “In times of change, it’s easy to lose focus, waiting to see what happens next. We can’t let that happen. This a great organization, full of incredible people who are resilient, committed and who care about our customers and our company. I’m asking all of you to please keep driving forward. Close every deal. Leave nothing on the table. We need that now more than ever.”

Below is a transcript of the video. We are currently working on obtaining the video itself.

Hi.

Today HP announced second quarter results, and once again, we delivered on what we said we would do. Our publicly-stated guidance for non-GAAP diluted earnings per share was 88 to 91 cents. And we delivered 98 cents, beating our outlook by 7 cents a share on revenues of $30.7 billion. I thank all of you for your hard work and dedication. This is a journey. We’re rebuilding credibility one quarter at time, and to do that, we need to consistently deliver on what we say.

You are at the heart of our results. Without your efforts, HP cannot thrive. But HP’s performance is still not where it needs to be. Our business is still declining. Year-over-year, non-GAAP EPS was down 21 percent and revenues were down 3 percent. We have a lot of work ahead of us to get HP back on track and that begins with executing against the strategy we’ve talked about in recent months.

Our foundation is infrastructure, PCs and printing, servers, storage and networking. This is a differentiating strength for HP and one we can be proud of.

HP Software extends and strengthens that foundation, solving customer challenges like managing, securing and automating the information flow across the data center.

Services makes it all work together for the customer, ensuring their technology is meeting their needs.

And finally, we combine our infrastructure, software and services into comprehensive solutions that deliver enormous customer value.

Moving forward we’re aligning our powerful collection of assets to capture leadership in three strategic areas: Cloud, security, and information optimization.

But to do this we must invest and we cannot afford to wait.

As we discussed in Q1, our costs are expanding while our revenues decline, and this has been happening for too long. The strategic realignment we announced last quarter was a good first step in addressing this problem by beginning the process of removing complexity, simplifying our operations, and reducing costs. And today we’re taking the next step in this journey with the announcement of a multi-year restructuring that will touch every part of HP and create a more streamlined company.

We’re taking a pre-tax charge of approximately $1.7 billion to be included in our FY12 GAAP results, as well as a further multi-year pre-tax charge of $1.8 billion. By the end of 2014, we expect to reduce the workforce by 27,000 positions through a combination of layoffs and early retirement. And we expect to generate run-rate cost savings of approximately $3 to 3.5 billion. These are difficult actions. Workforce reductions aren’t easy and we don’t take them lightly. They adversely impact people’s lives and are tough on the company, our culture and you. We’re trying our best to mitigate the impact as much as we can. We’ve limited hiring to try and reduce the number of people affected. For those positions we have open, we’re giving top consideration to internal candidates. We’re offering an upgraded early retirement package in the US, and expanding our career transition and planning services to better support employees.

I know HP has been through a lot in recent years and this is another dose of change. But in this case, it’s absolutely essential for the long-term health of our company. Let me share a little perspective.

At the end of 2009, we reported a workforce of about 304,000. At the end of 2010, we had almost 325,000 employees and at the end 2011, that number had ballooned to nearly 350,000. Over that same period, we saw year-over-year revenue growth of 10 percent in 2010, of 1 percent in 2011… and so far in 2012, revenues have been declining.

We’re struggling under our own weight. And we’ve got to restore a healthy balance in order to return HP to its position as a growing… thriving… innovating… industry leader. That’s what this is all about. And the workforce reduction is only one piece of a comprehensive effort. We see a lot of opportunity to remove complexity, streamline and reduce costs in a number of areas across HP.

I know that many of you remember the cost reduction of years past, like data center consolidation and centralizing functions such as HR, Legal, Finance and IT. What we’re doing now is different. We’re going after the big cost buckets and fundamental business process reengineering. This includes optimizing the supply chain, reducing the number of SKUs and platforms, continuing to hone our real estate strategy, simplifying our go-to-market, improving business processes, and implementing consistent pricing and promotions to drive end-user demand profitably. It’s harder work with greater potential payoff.

Another difference from years past is what we plan to do with the savings. The majority of savings this time around will be invested in the business. We’ll be investing to drive leadership in the three strategic pillars – cloud, security and information optimization. And in each of our businesses, we’ll make investments to stay ahead of customer expectations and market trends.

In our PC and Printing businesses, we’ll be focused on design, engineering, quality, and generating demand and desire with our customers.

In ESSN, we’ll invest to drive R&D and innovation in our core businesses of servers, storage and networking. Together they create a converged infrastructure that is the foundation for top customer initiatives such as cloud, big data analytics and social media.

In Software, we’ll be investing to speed development across Security, Information and Management Infrastructure for both on-premise IT and in the cloud – with a key focus on software-as-a-service offerings. This will include the extension of Vertica and Autonomy across our entire portfolio.

And in Services, we’ll improve processes and build-out capabilities in cloud, security and information. We’ll also be strengthening our industry practices, as well as our service quality and innovation.

Additionally, we’ll invest in our people – in better training, better career development and better tools and support.

In times of change, it’s easy to lose focus, waiting to see what happens next. We can’t let that happen. This a great organization, full of incredible people who are resilient, committed and who care about our customers and our company. I’m asking all of you to please keep driving forward. Close every deal. Leave nothing on the table. We need that now more than ever.

I’m confident in the decisions we’ve made and the direction we’re going. Together, we will define the future of HP and of our industry.

We’ll be holding our next all employee broadcast on June 18th and I look forward to speaking with you then and answering your questions.

Thank you.