Hewlett-Packard has unveiled a drastic cost-cutting plan to turn around the Silicon Valley giant as it struggles to compete against an array of new and powerful rivals.
HP will reduce its workforce by 27,000 jobs, or 8 per cent, while restructuring its business to save up to US$3.5 billion (Dh12.85bn) by the end of the 2014 financial year.
"While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long-term health of the company," Meg Whitman, the president and chief executive of HP, said in an earnings statement released on Wednesday.
Ms Whitman was quick to point out that the company exceeded the financial outlook it had previously provided for the company's second quarter, which ended on April 30. "But we still have a lot of work to do," she said after HP's profit plunged 31 per cent to $1.6bn in the second quarter, compared with the same period last year.
During the past two years, HP has struggled to stay competitive against companies such as Apple and Samsung, which have offered innovative products.
Increasing the pressure has been the emergence of Lenovo, the world's second-biggest computer maker. The Chinese company reported this week that its annual sales last year reached a record $29.6bn, up nearly 37 per cent from 2010.
"We're looking at number one," says Jack Lee, Lenovo's corporate vice president and general manager for the Middle East and Africa. "We want to make a stand - and be the last guy standing."
But HP plans to fight back, both in this region and globally - and prove it is not just a big brand from yesterday.
Eric Cador, the senior vice president of printing and personal systems for Europe, the Middle East and Africa at HP, has been involved with the company's restructuring plans. He talks to The National about how the company plans to recapture its glory years, and its move towards tablets.
How does the UAE fit into HP's portfolio, and how has that changed since you started overseeing operations in the Middle East when your company merged with Compaq in 2002?
Europe, Middle East and Africa [are] my regions. The main difference is 10 years ago we used to call it an emerging market. Today, we call them fast-growing markets. That's the main change. It's big, it's important, it's a fact. Middle East, Russia, Europe, Africa - those are four big areas for growth.
Your chief executive announced a big shift in March by consolidating the printing and computing sides of HP's business. Why was that necessary?
I would say the rationale to do it was to recognise we have the same customers, more or less, and we share the same channels. In the past, we used to be together, separated, together, so we've tried both. We thought that it was time to reduce cost, be more aggressive and to take faster decision-making. Those are the key reasons why we did that.
So what makes you think it's going to work this time?
Now it's [more] integrated. That makes things much easier, because you don't have two independent groups. Overall, I think that's going to work well.
At least HP is producing new products that are generating some buzz. You unveiled the new Envy Spectre XT ultrabook this month, but critics say it looks similar to Apple's MacBook Air design.
My view on this one is designers tend to be influenced by a lot of things. They may be influenced by materials, by trends, by shapes. Clearly the idea was not to copy anything, but I'm sure people get influenced by the fashion trends. At the end, the only thing that drives the final decision is what the customer wants.
From the drawing board to production takes up to two years. Is there a concern that by the time the product actually hits shelves it is going to be dated?
On PCs, it's more [a one-year] cycle. We would get the [views from] customers at the beginning of the year and [still be ready] for Christmas. It used to be two or three years. Now is it still too long? It's always too long. You want more flexibility, you want to go faster, but be cost-efficient and high-quality at the same time. It's always the balance between those challenges that you have to deal with.
What are some of HP's insights about the laptops that customers want in the Middle East?
First of all, most of the core technologies are the same. The move towards super-light, super-thin, super-classy design is kind of the same everywhere. Interestingly enough, where you see the most differences is either on screen size: Asia is more 14-inch, and Europe is more 15-inch; Middle East was a bit in between but more leaning towards 15. But the main difference that you see around the world is really down to colours.
Which colours do customers want?
In Europe, [customers go for] red in the UK and white in France. [Customers in the] Middle East like very strong colours, very powerful colours, which fail to work in Europe. When you're down to the colour - fashion, I'd say - then you see massive differences. [In the UAE], it's not so much the colours per se - red worked, and some blue - but they have to be strong. [Customers look for] strong blues and reds … really aggressive reds.
With HP's acquisition of Palm back in 2010, the idea was to get into smartphones and tablets. So far, HP has yet to launch a successful smartphone and has produced only one consumer tablet, the TouchPad. What's next?
Well, we've said earlier this year that we would come back with a Windows 8 tablet. We will come back to the tablet market. We have not made any commitment as to whether to [release a smartphone]. You know, the car industry is a big industry as well and we have decided not to be in that one. The mobile phone sector is big. Do I wish to be number one? Oh, yeah, but it's a difficult market. We are very strong in PCs - we are the leader in PCs. We want to grow and then go into tablets. That we will do.
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