HP To Cut 27,000 Jobs, Says It Is 'Making Real Progress'

By Michael Liedtke

SAN FRANCISCO -- Hewlett-Packard CEO Meg Whitman has quantified the painful price that must be paid for the missteps of her predecessors as she tries to turn around the Silicon Valley pioneer. The bungling will wipe out 27,000 jobs so HP can save enough money to lift its earnings and invest in the development of more profitable products and service.

The streamlining announced late Wednesday amounts to the largest payroll purge in Hewlett-Packard Co.'s 73-year history. About 8 percent of HP's nearly 350,000 employees are to be gone by October 2014.

The somber news 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 delivered another pleasant surprise by offering a forecast that raised hopes that HP may be poised to bounce back.

"While I wouldn't say we have turned the corner, we are making real progress," Whitman (pictured above) told analysts during a conference call.

Investors were pleased, although it wasn't clear whether their glee had more to do with the cost-cutting or the company's performance during its fiscal second quarter, which ended in April.

HP shares surged $1.97, or more than 9 percent, to $23.05 in Wednesday's extended trading following the announcements.

The announcement came eight months after HP hired Whitman to turn the company around. The company expects to save $3 billion to $3.5 billion annually from the job cuts and other austerity measures. HP will try to reduce the number of layoffs by offering early retirement packages.They're still worth just half what they were before HP parted ways with Mark Hurd, a cost-costing specialist who stepped down in 2010 amid a scandal revolving around the nature of his relationship with a former actress who worked as an HP contractor. An investigation uncovered inaccurate expense reports.

The current troubles at HP have been traced both to Hurd and his successor, Leo Apotheker, who didn't respond to the threat posed by a shift to computing on smartphones and tablets.

Whitman's plan calls for less bureaucracy so the company can respond more quickly to customer needs. She also wants to boost research and development to spur innovation.

HP, which is based in Palo Alto, Calif., has been struggling to sell more personal computers and printers; demand has softened as people spend more time surfing the Web on phones and tablets such as Apple Inc.'s iPad. And 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 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, with an emphasis on three areas: software services delivered online, a concept known as "cloud computing"; data storage and analysis; and computer security. Some of the extra cash will go toward boosting HP's earnings, too.

HP's work force has undergone several reorganizations during the past decade. Two of the biggest occurred during Hurd's regime. HP announced 14,500 job cuts in 2005 in one of his first big acts as CEO. A round of 24,600 cuts came in 2008 after HP bought technology consulting service EDS for $13.9 billion.

HP didn't say where it would make the latest cuts. It is combining its printer and PC divisions, which could reduce some overhead.

In related moves, Whitman is changing the leadership at HP's recently acquired Autonomy division, which makes software that finds and analyzes data within companies and government agencies.

Bill Veghte, HP's chief strategy officer, is replacing Autonomy founder Mike Lynch in an effort to boost the division's financial performance. The shake-up is likely to amplify investor concern about whether HP blundered last year when it paid $11 billion for Autonomy. Apotheker announced the deal in August, just a month before he was fired.

Whitman told analysts she still believes the Autonomy acquisition was smart.

The company earned $1.6 billion, or 80 cents per share, in February through April. That's 31 percent less than the $2.3 billion, or $1.05 per share, it earned a year earlier.

Excluding one-time items, the company said it earned 98 cents a share. That topped the average estimate of 91 cents a share among analysts surveyed by FactSet.

Revenue fell 3 percent to $30.7 billion, but that was about $800 million above analysts' average projection.

To pay for severance and other restructuring costs, HP expects to take a pre-tax charge of about $1.7 billion in the current fiscal year, which ends in October. About $1 billion of those charges will come in the current quarter, which ends in July. HP expects to record $1.8 billion more in charges through fiscal 2014.

The company also expects to register a charge of $1.2 billion to account for the declining value of the Compaq computer brand. HP bought Compaq a decade ago in a deal that many shareholders, including the son of a company founder, William Hewlett, tried to block.

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Elise

Didn't she just get a big pay raise?

June 10 2012 at 11:04 AM Report abuse rate up rate down Reply
Jawmore

Thanx to Obama a job well done.

May 25 2012 at 12:49 AM Report abuse rate up rate down Reply
waterdelta

bad news for HP! they need a new CEO!

May 25 2012 at 12:40 AM Report abuse rate up rate down Reply
g974

Spare us the croc tears, Meg. You will get your excessive bonus along with the top execs for making decisions that lowered the quality of your products. I am sure that you will hire 50k employees in third world companies to replace the people that you are laying off. We consumers are watching......... I will NEVER buy another HP product! Take your business to Somalia with the rest of the Tea Baggers!

May 25 2012 at 12:09 AM Report abuse +1 rate up rate down Reply
Lisa

The jobless rate dropped to 8.1 percent in April from 8.2 percent the prior month, but mostly as people gave up the hunt for work.
Now even more jobs lost due to the OBAMA policies, taxes and restrictions against companies.

May 24 2012 at 11:19 PM Report abuse -1 rate up rate down Reply
2 replies to Lisa's comment
zurrix

you're stupid

May 24 2012 at 11:56 PM Report abuse rate up rate down Reply
topspin360

Could you please name the policies ,taxes,and restrictions that Obama unilaterily enacted?Or even the ones that government has enacted to slow down growth.No one has ever been able to answer that question.

May 25 2012 at 2:58 AM Report abuse rate up rate down Reply
bouncer827

so they can hire 50,000 employees in india at a 10th of the price and provide 100% terrible customer satisfaction. seems like a rational plan to me.

May 24 2012 at 10:50 PM Report abuse +2 rate up rate down Reply
1 reply to bouncer827's comment
Lisa

Yea that is what the rich do when they can no longer afford to pay the taxes and follow the ridiculous regulations our government puts on them, then we wonder why unemployment keeps going up, lets just keep raising their taxes till they all walk away from America.

May 24 2012 at 11:21 PM Report abuse -1 rate up rate down Reply
1 reply to Lisa's comment
topspin360

If people were willing to work for Chinese wages,there would be plenty of jobs.

May 25 2012 at 2:59 AM Report abuse +1 rate up rate down
fredrdr

Once more the work force is punished for the failures of management. The rank and file are walked to the door and the executives receive bonuses.

May 24 2012 at 8:57 PM Report abuse +3 rate up rate down Reply
1 reply to fredrdr's comment
Hi Kathy & Dean

YOU ARE WRONG> IT is not once more the work force is punished. It is as the work force has ALWAYS been punished.

May 24 2012 at 9:39 PM Report abuse +1 rate up rate down Reply
sketch008

I wonder which third world hell hole just gained 27,000 slave wage job? I bet the CEO got a nice fat bonus after that!!!

May 24 2012 at 8:16 PM Report abuse +3 rate up rate down Reply
chickenslatts

I'm sure - like in all business & govt. entities - there are at least that many useless, "busy-work" positions that are either redundant, unnecessary, counter-productive & filled with with lazy unproductive people who's only goal is to produce bogus, job justification "projects" to keep their resource wasting jobs. I've never seen a medium to large American institution without these parasites - the product of the American "educational" system. Corporate "entitlement" is no different thant civil "entitlement". The sad reality is that the many of the slugs tend to keep their positions & many of the conscientious ethical employees get the boot. Nepotism, cronyism , a devalued educational system & the "nanny" state mentality have resulted in a decadent system slowly poisining itself.

As one who has spent my life working in blue & white color jobs, the military & civil service, both union & non union; a solid 50% of the American workforce (and the welfare force, for that matter) are firmly in the entitlement camp: They see nothing wrong with being lazy & greedy, devoid of ethics & self esteem with no desire to accomplish anything of value. In short, half the country is content to be cowardly thieves, content to live off the effort of others. It's simple as that. American's desperately need to grow up & embrace maturity & responsibility. In short - school's out. Forever.

May 24 2012 at 8:03 PM Report abuse rate up rate down Reply
2 replies to chickenslatts's comment
vandation

I hear ya chicken.

Have you seen the video Nancy Pelosi's daughter made in front of a welfare office ? She was on Bill Mahr. Check it out. Unbelievable.
http://www.youtube.com/watch?v=c2kGPdxkofo

May 24 2012 at 10:28 PM Report abuse rate up rate down Reply
topspin360

It's people like you who do all the real work that keeps us going.Thanks *******.

May 25 2012 at 3:01 AM Report abuse +1 rate up rate down Reply
jay917

What she is saying is that 27000 jobs will be going to a country that pays people 3.00 dollars a day so that investors can make .93 cents a year more

May 24 2012 at 7:05 PM Report abuse +3 rate up rate down Reply

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