NEW YORK (TheStreet) -- Investors are fed up with HP's Chief Firing Officer.
Hewlett Packard (HPQ) announced earnings Thursday evening that met Wall Street expectations. But it got there by slashing jobs -- not growing revenue. And that had investors doubting CEO Meg Whitman's statements that the tech giant's "turnaround remains on track" and that she can lead the company back to growth.
$HPQ No turnaround story. Where's the increase in Rev? All Meg can do to maintain share price is cut more jobs.? Honest Jonno (@HonestJonno) May. 22 at 09:28 PM
$HPQ Each conference call starts with the headline "we are cutting more jobs". Need a refresh of the management? Honest Jonno (@HonestJonno) May. 22 at 09:32 PM
Management revealed Friday that HP would cut more jobs than initially planned. The company plans to shed between 11,000 and 16,000 more jobs than the 34,000 positions it initially planned to eliminate as part of its plan to remake HP from a PC and printer company into a data service, cloud server and hardware hybrid.
The additional cuts come after HP's revenues declined from the prior quarter and the same period a year ago. Sales of $27.30 billion missed consensus revenue estimates by $110 million and dropped 1% from the prior three months. Earnings per share, however, met the consensus call for 88 cents.
A majority of investors on StockTwits.com believe Hewlett Packard's future under Whitman is to become a smaller company with a correspondingly smaller market cap. Sentiment on the stock is 69% bearish, according to site analytics.
$HPQ Additional 11k-16k jobs to be cut. You can't make money by firing employees.? Desi Trader (@desitrader100) May. 22 at 06:11 PM
@Purifoy Sales and net income continue to decline. Innovative products are what HP really needs.? Desi Trader (@desitrader100) May. 22 at 08:48 PM
The stock traded near flat after-hours, recovering from a sharp drop as the earnings news was mistakenly released before the close.
Bullish full-year EPS guidance of between $3.63 and $3.75 buoyed the stock, as well as Whitman's estimate that the company will save between 2 cents and 3 cents per share in fiscal 2014 from the additional layoffs, according to a transcript.
But is Whitman right?
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.