While Facebook IPOs, moves to a new campus and becomes a house hold name, Hewlett-Packard is planning one of its biggest layoffs, where it expects to cut between 25,000 and 30,000 people on Wednesday. This is in addition to the 120,000 layoffs its has done in the last few years.
HP, is a bloated company with no focus. Its employee head count has grown from 60,000 in 2000 to 360,000 today. Yet the markets it serves have remained the same. Its still a printer company in a age where no-one prints anymore (for sure young folks like me barely print anymore). I see this as the first leg of many more layoffs to come. I believe HP will be back to a 30,000 – 60,000 company in 5-7 years. Hence many more major layoffs are on the way.
HP’s demise also, affects many other valley companies like Intel, Net App, their suppliers and competitors. A smaller HP is bad for Intel, as it will buy less from Intel. There is no way, Intel can make up for the loss of HP’s business for a long time, if ever. This will spawn major layoffs in Intel’s supply channel. Expect Applied Materials, KLA and many others to be hit hard.
All this in turn will accelerate the downward spiral that Silicon Valley is on, one that I believe it won’t recover from. Silicon based technology is no longer a growth industry like its been for the past 50 years. Most of the large computation problems have been solved. The bay area and Silicon Valley, depend heavily on the tech sector, which is expected to take a big hit for years to come. That’s being optimistic.
Facebook and many of the social startups cannot absorb the massive layoffs to come. I see people leaving the valley in droves, home prices heading to the toilet, tax revenues drying up, crime going through the roof. Already, 30% of the many people in silicon valley eat at food banks and these are the good times (see 60 Minutes video). There is no time for foolish optimism. Its time for reality. The valley game is over.
Image source: Michael TottenChannels: hpq, intc