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Hewlett-Packard Faces a ‘Dogfight’ for Talent: Analyst

Thursday, 24 May 2012 | 12:40 PM ET
Meg Whitman
Photo: Max Morse | Wikipedia
Meg Whitman

Hewlett-Packard shares surged about 11 percent following a better-than-expectedquarterly earnings report and mass layoff announcement on Wednesday. By Thursday, the street is wondering how the company can keep it up with fewer resources.

The company will cut 27,000 jobs between now and the end of 2014.

“Morale at HP right now is probably not very good, but morale in (Silicon Valley) is very high. It’s going to be a dogfight for really talented engineers,” Jason Noland, analyst for the firm Robert W. Baird, said in an appearance on “Squawk on the Street.”

With a $28 price target and a “neutral” rating on the now $22 stock, however, Noland doesn’t write-off the possibility that HP could stage what CEO Meg Whitman characterizes as the "beginning of a turnaround."

Hewlett-Packard's Path to Profits
Jayson Noland, Robert W. Baird senior analyst, discusses Hewlett-Packard's restructuring plans, which includes cutting 27,000 employees and weighs in on the keys to improved earnings and growth.

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The company said the layoffs should save up to $3.5 billion, and Noland appeared willing to wait.

“[Whitman] is going to take these cost savings and invest in innovation, which points them in the right direction, but its going to take time — probably a couple years to see any real fundamental results,” he added.

HP is reducing the largest amount of workers in its 73-year history, and on Wednesday reported earnings and revenuebelow year-earlier levels. A transformation, by all accounts, will not be easy — especially when smartphone and cloud computing sales continue to make PCs look antiquated.

Noland suggest that HP consolidate: “Right now, as a partner or a customer to HP, you deal with different people to buy a server, software, services, or PCs. They need to bundle those together in a more elegant fashion.”

—By CNBC’s Jennifer Leigh Parker

Additional News: HP Beats on Earnings, Announces Layoffs
Additional Views: Whitman to CNBC: Revamping Just Beginning
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CNBC Data Pages:

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Disclosures:

Noland does not personally own HP stock, but his firm, Robert W. Baird and/or its affiliates expect to receive or intend to seek investment banking related compensation from the company or companies mentioned in this report within the next three months.

Disclaimer
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Follow Jennifer Leigh Parker on Twitter @jparker741.

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