UPDATED 14:52 EDT / MAY 17 2011

HP and Cisco Are On the Same Bad Trip, Apotheker May Cut Jobs

Cisco has received a succession of bad news, following a down slope for four quarters now. But Cisco is no longer alone on that ill-fated boat, now joined by their switch- and computer-networking rival, Hewlett Packard (HP).  Despite slightly exceeding expectations on its second quarter financial reports on profits, HP’s CEO Leo Apotheker expects a tougher third quarter, and shakeups from various levels. The cause of these dilemmas are weakening consumer PC market and an underperforming services unit.

In his memo obtained by Bloomberg, HP’s head, who assumed position last November, stressed: “Q3 is going to be another tough quarter, one in which we will be driving hard for revenue and profit. We have absolutely no room for profitless revenue or any discretionary expenditures… We will continue to manage our business prudently.” Apotheker’s words are seemingly looking at a full headcount re-planning.

This leaked memo, which obliterated the initial plan to discuss second quarter earnings on Wednesday to yesterday, left a bad taste for some, consequently causing a 5% dip in shares in pre-marketing trading.  The memo contained conservative forecasts and strategies by HP.  The downward trend that their CEO pegged for July, and the remainder of the year, is greatly affected by Japan’s earthquakes and other relevant events.

To echo criticisms and possibly divert attention and blame his predecessor, Apotheker pointed out former CEO Mark Hurd’s weakness in focusing too much on quarterly numbers and poor strategic planning, Apotheker said, “Despite our stated intention to change our services business, there never was any measureable shift in our services mix over the past several years. We had over-executed operationally and under-invested strategically and it became clear we were missing opportunities.”

All of these initiatives by HP and the leaders somehow reflect a cost-effective strategy, but a weakness in top line management is also observed. With the downbeat reception of their third quarter outlook, Apotheker may now be examining his roster again, and job cuts are perhaps in the cards. HP is without a doubt feeling Cisco’s pain, and trying to learn from others’ mishaps.

 


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