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Ovum Analysts Heavily Criticize HP Restructuring, Lynch Layoff

By - Source: Toms IT Pro

HP is facing major challenges in its restructuring effort.

HP is facing major challenges in its restructuring effort.HP is facing major challenges in its restructuring effort.HP is facing major challenges in its restructuring effort that will cost 27,000 employees their jobs at the company.

It has gone through such phases several times during the last decade, with many employees encouraged to leave by accepting an early retirement plan that, in most cases covers 12 to 16 months of the base salary. However, this time, the layoffs appear to be more severe and the analyst community is already shooting against the company and is warning HP customers to be careful with certain commitments to the company.

The good part appears to be the note that HP said it will be focusing investments on innovation.  The services division is expected to take the brunt of the layoffs and is retargeting at "the high client value areas of cloud, security and information analytics by enhancing HP intellectual property."

In a research note, Ovum's principal analyst John Madden said that "HP’s restructuring is painful but necessary in order to restore market and customer confidence after two years of turmoil." He noted that the market is skeptical whether HP can execute on its promises or not and HP's stability is especially questioned in its enterprise business. Madden even suggest that there are "reasonable scenarios where HP does not survive as a strategic supplier of enterprise-grade technology and services."

He noted that HP customers interested in "commodity grade products" such as Windows servers could rely on the HP's commitment, but the services area would be a different scenario: "We at Ovum recommend that enterprise and public sector IT managers carefully assess the risks associated with committing to HP for strategic IT projects." Ovum has been shooting sharp at the restructuring plan and criticized HP's layoff of Mike Lynch, who joined the company as part of the acquisition of Autonomy.

"Mike Lynch’s departure from HP seems counter-intuitive in light of the company’s intention to reinvest in R&D following its planned layoffs," said Ovum chief analyst Tim Jennings in a statement. "Lynch is a technology visionary, and parting company on the basis of poor sales execution in the division, indicates that HP has struggled to create a clear vision for how to leverage its very expensive acquisition."

While Lynch may be leaving for good, there is hope for other HP staff that is being laid off. According to sources close to the restructuring plans and who spoke to Tom's Hardware on the basis of anonymity, about 60 percent of the staff that was laid off with early retirement plans in a similar, but smaller restructuring initiative in 2008 has been rehired by HP since then.