Layoffs: At HP and Philips More Shoes Fall

Hewlett-Packard Co. (NYSE: HPQ) will lay off 29,000 people instead of the 26,000 it originally announced as it struggles to improve performance. Royal Philips Electronics N.V. will cut the 2,200 jobs it announced, on top of earlier estimates of 4,500 planned, before 2014. Either these companies are so much part of the old economy that they will need to permanently shrink or their senior managements have seen the recession wave that already has swamped many world economies.

The simpleton’s view of the job cuts at these two large corporations is that the slowdown in the economy will results in layoffs across hundreds of large companies around the world as their sales fall. More likely, HP realizes that the markets for personal computers, printers and IT consulting are in never-ending decline. Philips sees the same thing in its largest division — light bulbs. The bulb is now over a century old, no matter how much it has been improved.

Of course, there is an argument that recessions often hit the weakest companies in any sector first and hardest. HP rival International Business Machines Corp. (NYSE: IBM) has a more diverse product and service base. That may buffer it a bit as the economy slows. Microsoft Corp. (NASDAQ: MSFT) and Apple Inc. (NASDAQ: AAPL) may have similar advantages. And each is about to have a major upgrade in its product lines. That will help them slice through a recession, with any luck. Apple’s Mac, for example, may be as ancient as the PC, but for some reason Mac sales continue to grow, adding to the iPhone and iPad to create an almost perfect company with among the most popular products in the world. What does HP sell that sparks the public’s imagination or creates an overwhelming need to buy it?

Another large recession will do what all of those before it have. Companies that are in the sunset portion of their life cycles will have their prospects driven down more quickly. That will trigger more and more layoffs. Eventually, these companies will no longer be big companies at all.

Douglas A. McIntyre