Hewlett-Packard to Cut Thousands of Jobs as Earnings Miss

Rick Newman of Yahoo Finance discusses Hewlett-Packard's stock decline.
4:54 | 05/23/14

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Transcript for Hewlett-Packard to Cut Thousands of Jobs as Earnings Miss
I'm -- have a new York and has as Wall Street is heading -- -- weekend this Friday may 23 when a reunion story stock now. Today a look at Hewlett-Packard the technology giant getting a little smaller announcing another round of layoffs. So here explain what is happening at HP Rick -- from Yahoo! finance joining us on this Friday. -- -- -- HP's CEO Meg Whitman swears that this is it no more layoffs after men which is something that she's sort of said back in October. When HP announced 1000 employees were out so what's behind this latest round. -- HP is just too big. And it's not profitable enough -- got something like 370000. Employees worldwide that's -- time. HP has a problem because. They've been at acquiring a lot of companies and up until just recently they've been focusing. Mostly on their core business of hardware. Think about HP. Personal computers desktops and so for. And we know that that's just not the future of computing anymore obviously it's moving toward mobile devices cloud computing. People don't need the you know big hard drives it home anymore. And Hewlett-Packard just not positioned well for that so their -- Meg Whitman the CEOs entry has been trying to do this long turnaround. She has said it's gonna take a long time -- end -- -- -- their second year of it. And -- should they cut a lot of jobs last year that wasn't enough said they said they're gonna cut another 111000 to 161000 jobs this year. This sad reality is that layoffs are part of almost any business especially when as competitive. As fast moving as a tech industry is -- HP now has cut up to 45 to 50000. Jobs and it's essentially a small city. Worth of people how are investors how are they reacting to business. Well investors certainly don't mind layoffs -- the one group that actually thinks they're kind of a good thing for two reasons number one -- lower your costs and you just. Fewer people on the payroll means lower cost it's kind of that simple. And investors do seem to be encouraged by the progress. Hewlett-Packard has made -- over the last year sell their stock has actually outperformed. The S&P 500 index in the broader market for the last year so the problem is the stock just sank like a stunning 2011 -- 2012. So it's still behind where it still is way behind its prior peak and who knows if it'll ever even get back to that level. This is this is what Whitman had said about this latest round at HP there. We're gradually shaping HP into him into -- more nimble lower cost more customer and partner centric company then can. Successfully compete across -- rapidly changing landscape is it's spin or is their reality in that state. I think he could take those same words -- -- -- climb the many big companies without even knowing what business -- -- I I'm sure it's a little bit of both by. It's just extraordinarily hard to turn around an old company like this what we're seeing is something which we saw with IBM in the early ninety's for instance I mean IBM was at that time a huge company that just was committed to the wrong business which is. Huge mainframes when nobody needed them anymore so it's really difficult to turn around such a huge company you have to do. Get rid of a lot of people you have to get rid of a lot of executive -- maybe have to shed parts of the business. Because they're just not profitable for you anymore so. HP has made some of those strives. But there's just a lot more to go and it's just it's not clear that HP is gonna come out a lean mean fighting machine on the other hand I mean it's not anything like that right now. It's still a very large company that's rooted in the twentieth century. Well what kind of level of confidence to analysts or other investors put in that kind of statement and that they've gotten the right number they've gotten the right strategy -- -- -- we're going to be talking about this again in three months do you suppose. Sure I think it's quite possible and I think Meg Whitman herself has said that -- -- we did see a nice pop today I am not sure if you put that stock chart up but 6% rise in the stock today and it's -- -- because the earnings results they just announced they mistakenly. And that led the stock to fall toward the end of the day yesterday but when the news of these layoffs came out today during the during the earnings call the stock shot up. So investors think that that's a good thing they they like the idea of -- costs and getting the company a little bit smaller. But that you know that's -- -- you know keep the stock up for maybe a few days or -- and they're going to be in new problems next week it is still a gigantic company that's not really well positioned for the very fast moving technology economy would have -- so to me a lot more changes at this. Company yet not the kind of news that people -- -- HP wanna hear hey is this Memorial Day weekend. Curricula from Yahoo! finance Rick thanks much for time of occasions if you've been watching -- -- stay with abcnews.com for the latest headlines I'm Dan Adler New York.

This transcript has been automatically generated and may not be 100% accurate.

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