Thu, Sep 17, 2015 - Page 15 News List

HP to prune workforce by 10%

RESTRUCTURING:The cuts are in line with a plan to split the company into two — one focusing on servers, storage, software and services, and the other on printers and PCs

NY Times News Service, SAN JOSE, California

A year ago, Hewlett-Packard Co (HP) chief executive Meg Whitman announced she was cutting the company in two. On Tuesday, she detailed job cuts expected at the company.

About 10 percent of the jobs at the current HP, or perhaps 30,000 of its 300,000 employees, is to be eliminated, company officials said.

“We’re looking forward to operating as two industry-leading companies,” Whitman said at a meeting of financial analysts. “You’ll see us doing more pruning of businesses that don’t fit.”

Whitman became the head of HP in 2011. As part of a restructuring announced in 2012, 54,000 jobs have been cut at the company. The new cuts are on top of those.

In November, Whitman will become the chief executive of HP Enterprise (HPE), which will sell things like computer servers, data storage, software and services to business.

The other company, called HP Inc, will focus on printers and personal computers. Whitman has said the division will enable both businesses to react faster to changing markets.

The big job cuts will come from HPE, in particular jobs at call centers and other service centers in developed countries. HP plans to automate many of the jobs and build out positions in countries like India and Costa Rica.

The services business had been largely dependent on just a few customers and it lost important accounts last year.

HP chief financial officer Cathie Lesjak said HP Inc, which will have about 50,000 employees, will reduce its head count by 1,200 employees next year, and a total of 3,300 employees by the end of 2018.

Longer term, HPE is also retraining its sales force, aiming to increase the amount of technology consulting and cross-selling work the company does. This is typically the kind of work done by companies like IBM Corp, while the old HP made lower margin, but high-volume sales of individual products.

There will most likely be high demand for technology deals, as companies move to new styles of business enabled by the growth in mobile devices and cloud computing. However, it is uncertain whether HPE can win the confidence of lots of customers.

While Whitman said HP was switching “from turnaround mode to growth mode,” some analysts were skeptical about her projection that HPE would have a compound annual growth rate of 4.4 percent over the next three years.

“Half your portfolio is not going to grow for the next three years,” Sanford C. Bernstein & Co analyst Toni Sacconaghi said. “Is it really realistic that HP can grow?”

It can “if enterprise services can stop shrinking,” Whitman said.

Despite the torrid growth at smaller tech companies in hot areas, she said HPE was aiming for “GDP-like growth rates” and hoping to raise profit margins with efficient management.

Whitman will also be chairwoman of HP Inc. Dion Weisler, who runs the printing and PC business at HP, will be chief executive.

HP shares rose US$0.07 to US$27.11 on Tuesday. The stock fell during after-hours trading.

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