Hewlett-Packard Co (HP) is cutting 27,000 jobs in an effort to recover from management missteps that hobbled the Silicon Valley pioneer as its rivals raced ahead with more innovative products and services.
The streamlining announced on Wednesday represents HP’s largest payroll purge in its 73-year history. The reductions will affect about 8 percent of HP’s nearly 350,000 employees by the time the overhaul is completed in October 2014.
The cuts come eight months after HP hired Meg Whitman as CEO to turn the company around.
HP hopes to avoid as many layoffs as possible by offering early retirement packages.
The company expects to save US$3 billion to US$3.5 billion annually from the job cuts and other austerity measures.
Word of the mass layoff had leaked out in media reports late last week, so the news did not come as a surprise.
Nevertheless, the sobering details overshadowed the release of HP’s latest quarterly results. Although HP’s earnings and revenue declined from a year ago, the numbers were better than analysts had projected. HP also delivered another pleasant surprise by offering a forecast that raised hopes that HP might be poised to bounce back.
“While I wouldn’t say we have turned the corner, we are making real progress,” Whitman told analysts during a conference call.
Echoing comments she made three months ago, Whitman cautioned that “turning HP around is going to be a lot of hard work. It’s going to take time, but we know what needs to be done.”
HP, which is based in Palo Alto, California, has been struggling to sell more PCs and printers, partly because they are not needed as much now that people are spending so much time surfing the Web on phones and tablets such as Apple Inc’s iPad. The company’s efforts to sell more business software and consulting services have been stymied by competition from the likes of IBM Corp and Oracle Corp.
“Work force reductions are never easy,” Whitman said on Wednesday. “They adversely impact people’s lives, but in this case, they are absolutely critical to the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced cost for HP.”
Whitman plans to funnel most of the savings from the job cuts into product development. Some of the extra cash will go toward boosting HP’s earnings, too.
HP’s workforce has undergone several other reorganizations during the past decade. HP announced 14,500 job cuts in 2005 and 24,600 cuts in 2008 after buying technology consulting service EDS for US$13.9 billion.
HP did not say where the latest cuts would come from. HP is combining its printers and PCs division, which could reduce some overhead.
The company earned US$1.6 billion, or US$0.80 per share, in the February to April quarter. That represented a 31 percent decline from US$2.3 billion, or US$1.05 per share, from the same period last year.
If not for several items unrelated to HP’s ongoing business, the company said it would have earned US$0.98 per share. That figure topped the average estimate of US$0.91 per share among analysts surveyed by FactSet.
Revenue fell 3 percent from last year to US$30.7 billion. That was about US$800 million above analyst projections.