Sun, Jul 17, 2005 - Page 11 News List

HP to cut thousands of jobs next week: analysts

`THE BIG ONE' Up to 25,000 people could be laid off in a long-expected restructuring as part of new CEO Mark Hurd's cost-cutting strategy to catch up to rivals


Hewlett-Packard CEO Mark Hurd arrives at an event in Beijing celebrating HP's 20th year in China on June 20. Hurd has made no secret of his intent to reduce expenses at the Palo Alto-based company, which could involve cutting 5,000 to 25,000 jobs.


Hewlett-Packard Co is widely expected to cut thousands of jobs next week as part of a long-expected restructuring that will attempt to bring the computer maker's costs in line with business and its rivals' numbers, according to industry analysts.

The exact timing and number of layoffs isn't known, though observers speculate layoffs could range between 5,000 and 25,000 positions. The huge company, whose offerings range from digital cameras and printers to computers and corporate consulting, has 150,000 workers worldwide.

Shares of HP gained US$0.33, or nearly 1.3 percent, to US$24.95, in Friday afternoon trading on the New York Stock Exchange. The stock has gained about 15 percent since HP named NCR Corp executive Mark Hurd as its new chief executive in late March, replacing the ousted Carly Fiorina. The stock was trading on Friday at a 52-week high.

Hurd has made no secret of his intent to reduce expenses at the Palo Alto-based company. In May, he told financial analysts that HP's cost structure is "off benchmark in many areas."

Alexa Hanes, an HP spokeswoman, declined to comment Friday on "rumors and speculation." Some HP workers have taken to calling the upcoming news "the Big One," according to the San Jose Mercury News.

In a research report on Thursday, Moors & Cabot analyst Cindy Shaw said a management reorganization could be announced as early as Monday -- and could include as many as 25,000 job cuts. She also said the company might announce the expected retirement of chief financial officer Bob Wayman.

Shaw did not provide details of how she obtained that information.

In June, Sanford Bernstein & Co analyst Toni Sacconaghi estimated the job cuts would range between 7,500 and 15,000 with HP's enterprise and services division "likely to present the biggest opportunities."

He also said HP's research and development spending is nearly US$1 billion higher than the sum of its relevant competitors.

"We think HP is rife with cost-improvement opportunities," Sacconaghi wrote in the research report, adding the company could realize annual savings of between US$750 million to US$1.5 billion.

Richard Chu of SG Cowen & Co said it's likely between 10,000 and 15,000 jobs will be cut in the upcoming announcement.

Chu expects cost reductions of US$1 billion for the next fiscal year and about US$1.4 billion the following year.

HP's core strength is in printers and imaging, but it wants to diversify. The problem is that it faces competition from super-efficient Dell Inc in low-end offerings such as personal computers. At the same time, it competes against well-established International Business Machines Corp in the more profitable area of enterprise hardware and services.

Since joining HP, Hurd has made several changes, though none is expected to have the impact of the expected major cost cutting.

Earlier this week, Dell's chief information officer was hired to fill the same position at HP. Last month, Hurd split HP's personal computer and printer divisions -- a marriage that was one of Fiorina's last moves before her Feb. 9 ouster.

HP, which reported annual sales of US$79.9 billion for the year ending Oct. 31, is expected to announce its fiscal third-quarter results on Aug. 16.

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