Some investors argued that Whitman is right to make HP leaner. The company had 317,500 employees as of October 31, 2013, according to HP's latest annual filing. That's a lot of mouths to feed while trying to change focus, some said. Better to be as lean as possible and then add back jobs in growth areas after the turnaround takes effect.
@desitrader100 yeah you can. slim down and make a meaner leaner machine....uh. you can make money, their salary now goes into the company.? Mark Purifoy (@Purifoy) May. 22 at 07:40 PM
But most said cutting jobs and repurchasing shares wasn't enough to make HP relevant in the future. Job cuts hurt morale, making innovation more difficult. Instead of axing employees, some investors argued that HP needs to invest its money not in the $1.1 billion in dividends and share repurchases it spent during the quarter, but on purchasing an innovative company that could help fuel growth.
One potential acquisition discussed was Rackspace (RAX). The cloud service company, which runs and manages enterprise software from remote servers, recently hired investment bankers to explore "strategic alternatives," including acquisition. Rackspace has a market cap of $4.97 billion and is down nearly 53% from its all-time high of nearly $79 per share, hit last December, due to concerns that competitors are out-investing it and that it cannot compete on price with the likes of Google (GOOGL), Microsoft (MSFT) and Amazon (AMZN).
To be sure, Whitman is aware that HP needs to innovate. On the conference call, she said that "innovation is the heart of our strategy to turn HP around." She touted the launch of HP Helium, a portfolio of cloud-hosted software and products. She also said that the organization had become too cumbersome, making it difficult to properly serve clients and stabilize revenues.
But investors weren't impressed with Helium last night. Until HP can really show it has new ideas and not just a thinning staff, a majority of investors on Stocktwits said shares will head lower than their $31.38 Thursday closing price.
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At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.