Hewlett-Packard Co. is a world renown company which manufactures computers, printers and other sort of hardware. They have decided to split their company into two parts, one that will sell the computers and printers and the other will sell the corporate hardware and services operations. The latter will be called Hewlett-Packard Enterprise. To proceed with this split, they have to cut up to 30000 jobs from their company. Based on HP to cut up to 30,000 jobs in enterprise business, this move will result in a charge of around $2.7 billion.
HP is a global company and they will redundant their employees from around the world. This will result in an increase in the rate of unemployment in all the countries where the employees are being fired from. This will lead to a lower GDP for those countries and that will reduce the standard of living, hence the sales of various goods including HP’s goods will fall. But this will help HP by reducing their cash outflows hence improving their cash flow forecast and help them invest on the development of both the individual companies as it will take time and capital to set them up to a condition where they are both fully functional.
The decision to split the companies has led to a fall in the stock prices for HP by 2.3% dropping to $26.50 per share. This is because the shareholders do not know whether this new strategy will help them grow and increase the profits or whether it will backfire and lead to a fall in the company’s situation. The decision taken by HP is taken to help them focus on their products individually so that they could specialize on their goods and services. Now they can hire the new employees based on the specific requirements. This will lead to a small and specialized workforce which will increase the efficiency of both the companies and the profits, but since there will be high initial costs, it will take time to earn a high rate of profits.
HP needs to make sure they take their actions promptly as they are in a critical situation and need to give the shareholders reassurance that they have made the right decision.
