Analysts back Hewlett Packard's layoff plans
(Reuters) - Analysts said Hewlett Packard Co's plan to cut jobs was a step in the right direction but the PC maker will have to do more to regain investors' confidence.
Shares of the world's No. 1 personal computer maker were up 6 percent at $22.26 in early trading on the New York Stock Exchange on Thursday.
"While we certainly don't believe HP has resolved all their issues, we do see the company moving in the right direction," RBC Capital Markets LLC analyst Amit Daryanani wrote in a note to clients.
The accelerating popularity of mobile computing devices such as Apple Inc's iPad has been eroding PC sales for years and a downturn in the European markets has just added to the pressure.
Rival Dell gave a disappointing revenue forecast Earlier this week that spurred fears that global tech spending is weakening faster than anticipated.
HP said the layoff of 27,000 workers, or 8 percent of its workforce, would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014. The company employs more than 300,000 people globally.
Hewlett Packard, which also posted a second-quarter profit above market estimates, said it expects to use the cost savings from job cuts to drive organic growth.
"The market will likely want to see that the savings are real and tangible in the bottom line before they are diverted to other things," Nomura Equity Research analyst Richard Windsor said in a research report.
"When one has little faith in a management team, there will be little hope that these savings will ever be properly realized as they will never be properly visible," Windsor said. Continued...