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H-P's Whitman takes charge with big cuts

SAN FRANCISCO (MarketWatch) -- Hewlett-Packard Co.'s Meg Whitman made her biggest, and probably toughest, move in announcing the computer giant's biggest layoffs ever, and if she and her team execute, she could bring shades of Lou Gerstner's IBM revival to H-P.

Gerstner is well-known in American business for his turnaround at International Business Machines Corp. (IBM) . In one of his first big moves, Gerstner and his righthand man, CFO Jerry York, did a big round of job cuts within three months of joining IBM in 1993. But Gerstner also reinvested and built up the company's now massive services business.

H-P's (HPQ) Whitman has similar plans, and investors are giving her an initial thumbs-up. She promises to eventually reinvest some of the $3 billion to $3.5 billion the company will save in innovation, research and development, as well as quality and design of products. She also plans to streamline H-P's business processes. Read more about H-P layoffs.

Shareholders sent H-P's stock up nearly 10% in after-hours trading following the report -- despite the fact that the job cuts had been leaked a week earlier. See May 21 earnings preview: H-P report to include news of big job cut.

Whitman said she wants to "reposition H-P to take advantage of some of the biggest shifts I have seen in my career" and focus on areas such as cloud computing, data centers and dealing with big data. Former H-P CEO Carly Fiorina was in a similar position, joining the company in time for a huge shift in the industry with the Internet economy in its early stages. But while some of her moves for H-P were right, Fiorina's tenure was problematic.

Whitman sounds like she is doing the right things and has the right ideas. But whether she becomes another Fiorina or a Gerstner is yet to be seen. It will ultimately be up to her and her team and whether they can reinvest in innovation and get H-P's engineers inventing again.