HP cuts 27,000 staff as Autonomy chief Lynch leaves

HP cuts 27,000 staff as Autonomy chief Lynch leaves

Summary: Mike Lynch, who saw his UK software analytics provider sold to HP last year for £7.1bn, is to be replaced by HP's strategy chief after the company reports a 'disappointing' second quarter

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TOPICS: Tech Industry
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HP has said it will lay off 27,000 people and cut its product and platform portfolio, as it revealed tumbling revenue and profits.

The job cuts come as the company released its second-quarter earnings. Revenue in the quarter was down by three percent year-on-year to $30.7bn (£19.6bn) and profits dropped by 31 percent to $1.6bn, HP said on Wednesday. 

The "restructuring" will allow it to make savings of $3-3.5bn in the 2014 fiscal year, "of which the majority will be reinvested back into the company", it added.

The 27,000 employees, or eight percent of the company's workforce, will be out by the end of 2014. In addition, Mike Lynch, the head of big data specialist Autonomy, which HP bought last year for £7.1bn, will also leave the company. 

Mike Lynch of Autonomy

Mike Lynch shows off Autonomy's augmented reality tool in this 2011 image. Credit: Autonomy

Cambridge-based Autonomy had a "very disappointing license revenue quarter with a significant decline year-over-year resulting in a shortfall to our expectations ", chief executive Meg Whitman said in an earnings call, as transcribed by Seeking Alpha. Lynch will be replaced by HP's chief strategy officer, Bill Veghte.

It is not certain how many of the 27,000 axed staff will be in the UK. HP employs around 20,000 people here, including the 175 who came with the Autonomy deal.

"We do expect the workforce reduction to impact just about every business and region. Beyond this, unfortunately, we do not have anything else to share at this time," a spokesman for HP told ZDNet UK.

Unite believes that up to 1,600 British jobs could be at risk, saying on Wednesday that it and fellow union PCS hope to hold talks with HP's management on the matter soon. About 3,500 Unite members are employed by the technology company, the union said.

"Workforce reductions are never easy," Whitman said on the call. "They adversely impact people's lives, but in this case, they're absolutely critical for the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced costs for HP."

HP hopes to soften the blow by offering workers an early retirement plan, which may reduce the number of redundancies. Apart from sacking people, the company said it will "achieve additional savings" by cutting products and platforms, optimising its supply chain and improving its business processes.

Overall, the plan is to "shift the portfolio to a more profitable mix of higher-growth services". HP will put more money into R&D and marketing in the fields of the cloud, security and big data, it said.

Falling revenue

The second-quarter results revealed that HP's market-leading notebook division saw a three percent revenue drop. However, the biggest declines were in printing, where hardware was down 15 percent and supplies down 12 percent year-on-year, and business-critical systems, down 23 percent over the same period.

"Overall, I feel cautiously optimistic coming out of Q2," said Whitman, who has been chief executive for half a year. "Our results appear to be stabilising. While I wouldn't say we turned the corner, we are making progress."

Whitman pointed out that HP's decline was slowing, and said the poor results of the imaging and printing group were down to "weak consumer demand and natural disasters". She said the division was "working on new pricing models, services and solutions to further differentiate [its] offerings".

On the enterprise side, HP's 3PAR storage systems saw slight growth, but tape and the Enterprise Virtual Array (EVA) line were weak. "This is an anticipated product transition and we're effectively managing the shift to our next-generation storage arrays," Whitman explained.

Whitman said that, despite Autonomy's poor showing so far, its competitive position remained strong, particularly in its cloud software.

"Bill [Veghte] is an experienced software leader who will develop the right processes and discipline to scale Autonomy and fulfil its promise, although it will take a few quarters to see tangible improvements," she said.

Topic: Tech Industry

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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3 comments
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  • Strange statement from HP regarding Mike Lynch and not capable of scaling a company. Autonomy was a $7bn purchase which started as a small company in Cambridge years ago. With the state of the world wide economy it is a struggle for most companies to increase profits, including HP itself. Something not quite right here.
    pjc158
  • I agree: Mike Lynch can clearly build a business and manage strategy. I suspect the exit of Mike is more likely the end of a planned handover period?

    With regard to HP's sliding fortunes, they have been to over dependant on hardware sales for years, with ever decreasing margins available and now with PC and Laptop sales down due to the rise of the tablet, they are making what appears a desperate effort to change thier business model buying businesses such as Automony. Perhaps without clear strategy of how they will be successfully integrated with the wider business.

    Still you have to say one thing. Bet Mike Lynch did well - fair play to him!
    Phil - Cloud4 Computers
  • You guys have no idea what is going on at Autonomy. Autonomy could have been a much more profitable organization. The sales operations at Autonomy is a complete joke. I can safely bet 100% of the sales force was DELIGHTED to hear HP acquiring Autonomy! Reason? We get to use Salesforce.com rather than Mr. Lynchs HORRIBLE home grown CRM system called SMS. From a sales perceptive, there was no ability to understand if a company targeting is a customer or not. Its embarrassing sometimes. Secondly, SMS was geared to foster in-house competition. In other words, no rep trusted any other rep, because many people like to steel deals. Happened all the time. We were required to update SMS everyday and it took about 3 hours per day to do it, if you don't, you get fired.

    Another reason, Autonomy's management was so cocky and outright ruthless. I was on two separate sales calls at different times, (SMS Calls) when a sales rep gets fired over the phone. Got to understand, there are about 20 to 30 people on the phone. Unreal...

    I talked to recruiters all day and most of them say, "No need to tell me why you want to leave Autonomy, I just talked to 10 of you guys." Sad...

    I am feeling sorry for the Microsoft guy. He is going to have a rude awakening of the reality over at Autonomy. No transparency with numbers forecasted, unqualified reps selling solutions out of their comfort zone (maybe because they can't keep anybody or recruit people because of their past), and guess what...

    The software does NOT work. Guys lets be honest. Amgen returned $4 million of Autonomy's software because it was oversold. I had four deals over $1 million, all POCs fell flat. There is no bench to support Autonomy and its technology. The references listed are customers that DO NOT have "Meaning Based" anything. Autonomy's IDOL platform does not make up their "happy" customers. The happy customers are not using IDOL. IDOL has a great message, but, it doesn't work. IDOL is not integrated with their Data Protection platform and other parts of their disorganized three pillar go to market strategy. Sad, because, I loved the message and it was brilliant.

    Autonomy's wheels finally came off. The reps are stoked the "Glass Box" is now shattered. Unfortunately, a company like HP will now have full control of a software strategy. it will be interesting.
    craigsc-ed6d7