HP to cut 27,000 from workforce

HP to lose 8% of headcount as its looks to organisational restructure

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HP to cut 27,000 from workforce HP is looking to streamline operations, says CEO Whitman.
By  Mark Sutton Published  May 24, 2012

HP is set to cut 27,000 jobs, around 8% of its total workforce, by the end of FY2014.

The cuts are part of an organisational restructuring program, which follows on from the merger of HP's personal computing and printing divisions.

The company says that it offer an early retirement program to minimize the impact to its employees, but did not disclose further were cuts would be made. HP will take a pre-tax charge of approximately $1.7 billion in fiscal 2012, with additional pre-tax charges approximating $1.8 billion through to 2014.

It was also announced separately that Mike Lynch, founder of software infrastructure solution developer Autonomy which was acquired by HP last year for $11.2bn is to leave HP. Lynch is the latest of several Autonomy executives to leave HP.

HP will also look to make non-headcount savings, through supply chain optimisation, SKU and platform rationalisation, improved business processes and simplification of go-to-market strategies. By 2014, HP says it expects to make annual savings of $3 billion to $3.5 billion. The savings will be invested in back into R&D for the PC and print division and the enterprise hardware lines, services around cloud, security and information analytics, and improved development of software for security, big data and management of application lifecycle and infrastructure solutions.

"These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business," said Meg Whitman, HP president and chief executive officer. "While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders."

John Madden, principal analyst at Ovum commented: "HP's restructuring is painful but necessary in order to restore market and customer confidence after last year. We've been down this road before, of course, and the market remains skeptical about how these operational changes will enable HP's stability, especially for its enterprise business. What's somewhat encouraging is HP's indication that most restructuring savings will be directed toward R&D - a part of HP's legacy and history which the company has sorely undervalued in the past few years, but which will be a critical component of HP's recovery in new product and service development. So as of now we've seen the major pieces of Meg Whitman's restructuring and operations plan - the key missing piece is her long-term company vision and strategy, which hopefully will be revealed to an anxious customer base soon. Even with this restructuring, the question still remains: Just what kind of company does HP want to be next year, three years, five years from now?"

Commenting on the departure of Lynch, regarded as a technology and scientific innovator from HP, Tim Jennings, chief IT analyst at Ovum, said the move looked like a lost opportunity for HP at a time when it looks to increase its focus on R&D.

"Mike Lynch's departure from HP seems counter-intuitive in light of the company's intention to reinvest in R&D following its planned layoffs. Lynch is a technology visionary, and parting company on the basis of poor sales execution in the division, indicates that HP has struggled to create a clear vision for how to leverage its very expensive acquisition," Jennings said.

"Since the acquisition, HP has allowed Autonomy to run autonomously (admittedly somewhat at Lynch's behest), including maintaining separate R&D functions, but this has made it difficult to benefit from the company's core technology within the broader HP portfolio, just at a time when it is one of the hottest areas for enterprise investment.

"HP would have been better advised to utilise Lynch's talent across all of its software business, rather than to allow him to remain at arm's length, and subsequently land him with the blame for poor sales execution."

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