HP going public on more job cuts, say expectant analysts

Enterprise Services in firing line? Execs to detail biz financials post split

HP CEO Meg Whitman is to brief financial analysts Stateside later today on the commercial forecasts post split, with Wall Street types also expecting detailed news of more jobs cuts on the Enterprise Services side.

The company breaks apart legally from the 1 November, forming HP Inc (PC/printers) and HP Enterprise (the rest of the portfolio) – the two halves were separated operationally from the start of last month.

Management are to provide details on the long-term growth forecasts and margin targets for each of the businesses, claimed Deutsche Bank analyst Sherri Scribner in a note to investors.

HP’s share price is down 33.33 per cent in the year to date, and the separation is viewed as a “positive catalyst” for market cap gains, she said, and “[HPE] is an under appreciated growth and margin expansion story”.

“For Hewlett Packard Enterprise, we expect management to provide more detail on the cost cuts needed in Enterprise services and outline its opportunities and strong position in hardware,” said Scribner.

HP has yet to conclude the current multi-year redundancy programme that will see nearly 58,000 people leave the company by the end of October. Another round of costs cuts will hardly boost morale.

The services division was hit hard by the reduction in large outsourcing contracts, with customers, including the UK government, choosing to break up those big deals and share them among a wider number of IT suppliers.

Deutsche Bank – which itself signed a big outsourcing deal with HP this year – is currently anticipating revenues declines for HP Inc, given its exposure to the shrinking PC and print hardware markets.

“But we expect management to make the case that this business can grow over time based on careful market positioning, share gains, market consolidation and new opportunities in areas like 3D printing.”

The commentary from HP top brass will be upbeat but Deutsche Bank is expecting the company to issue financial goals that shoot a little low.

“We believe management will want to be able to deliver on targets in order to provide further justification for the split,” the financial analyst said.

One financial analyst expecting big things of HP Analyst Day is Brian Alexander, the tech watcher at Raymond James, who early in the summer touted a merger between HP and EMC.

He predicted HP will announce any such talks at today event. ®


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