Friday, May 25, 2012

Quarterly Financial Results

Hewlett-Packard is laying off 27,000 people. They are doing this because their revenue and profits are down. This is coming up now because their most recent quarterly results were released recently. One requirement for publicly traded companies is that they have to report their results four times per year. Every time they report results the owners (stock holders) will hope that the company makes a little bit more money than they did at the same time last year. If the company is not doing well the investors will request action. If a lack of performance continues the investors will demand action. In part this happens by the share price dropping as people sell their shares, in other words, a measure of the value of a company decreases.

While this strikes me as somewhat successful system of establishing value, it also strikes me as an incomplete picture of the health of a company. Employees work on projects from the daily duties to the multiyear projects with value not actually generated through sales until years later. As I am one of those who typically works on projects years before value is typically realized it troubles me to hear about a company responding to poor quarterly results through massive layoffs. It is yet another reminder how fragile our personal "stability" really is.

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