HP to trim 9000 jobs in US as part of cost-cutting plan

HP will also cut 8.000 jobs in the European Union as part of a plan to cut 27,000 jobs by fiscal 2014

Hewlett-Packard plans to trim its workforce by about 9000 in the US as part of its long-term plan to reduce 27,000 jobs worldwide by fiscal 2014, a source familiar with the company's plans said.

HP in May said it was cutting about 8 percent of its workforce through a combination of layoffs and retirement offers in an effort to save US$3 billion to $3.5 billion through fiscal year 2014. At the time, HP said that employee reductions would vary by country.

HP also plans to reduce 8,000 jobs in the European Union, which is in line with the company's legal obligations to inform and consult with the European Works Council (EWC), a body in the European Union that represents the workers of multinational companies.

HP declined to comment on the layoff plans. A further breakdown on where employee headcounts would be reduced was not available.

The layoffs began last year starting on Oct. 31, when the company's employee count was at around 350,000. HP's reduction in employee count is intended to preserve the long-term health of the company, CEO Meg Whitman said at the time of the announcement in May.

HP's employee count in 2007 was 172,000, but jumped sharply after the company acquired services company EDS in 2008. Since then, the company's employee count has been above 300,000 every year.

A majority of the savings from the restructuring program will be reinvested in the company, Whitman said last month. The company wants to make the buying experience simpler for customers, and is investing in marketing and sales tools. Some of the results are already visible, with the company trying to make computer buying experience less confusing with PCs now organized around core brands that have been successful.

HP is trying to put more focus on the higher-margin enterprise business while reworking its PC business to deliver better margins. Under former CEO Leo Apotheker, the company thought about selling or spinning off its PC business, which was ultimately retained after Whitman was appointed CEO in September last year.

The company's Personal Systems Group (PSG), which deals in PCs and mobile products, is the company's single largest unit, delivering 30 percent of the company's revenue in the second quarter of fiscal 2012, which ended on April 30. The Services unit had 28 percent of revenue, the Imaging and Printing Group accounted for 19 percent and the Enterprise Servers, Storage and Networking group had 17 percent.

On the enterprise side, the company is looking to bring hardware, software and services closer by offering integrated packages. HP's enterprise business continues to revolve around services and hardware but the company wants to become a player in software, as evidenced by the acquisition of analytics company Autonomy for $12 billion last year. The company intends to put its Autonomy software across its entire product portfolio.

Where the savings from the restructuring program will go is anyone's guess, said Charles King, principal analyst at Pund-IT.

The focus on software and emphasis on areas such as cloud computing, security and information management is a step in the right direction, but those are not easy markets to go after, King said.

"The only caveat is every one of HP's major competitors are actively pursuing that area as well. It behooves HP and Whitman to say ... how they are going to differentiate themselves," King said. HP's major competitors include IBM, Dell and Oracle.

Integrating software and services will bring incremental value to the company's hardware products, King said.

HP, however, has some issues to address, especially in the printing and imaging business, which has been the company's cash cow for years but where profit is now dwindling, King said. HP also has to clarify its mobile strategy, which remains in limbo after discontinuing devices based on WebOS and its decision to open source the operating system.

There have also been bumps in the company's software efforts with the departure of top Autonomy executives, including founder Mike Lynch], King said. HP is primarily a hardware company and has to prove it has the software chops to effectively integrate Autonomy across products.

HP's net profit for the second fiscal quarter was $US1.6 billion, a drop of 31 per cent over the same quarter a year ago. HP's revenue was $US30.7 billion, falling from $US31.6 billion in the same quarter of the previous year. HP has forecast third quarter earnings of $US0.94 to $US0.97 per share, below previous expectations of $US1.02 per share.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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Agam Shah

IDG News Service
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