HP confirms mass layoffs

By Allie Coyne on May 24, 2012 8:41 AM
Filed under Hardware

Reveals Compaq review, dire Q2.

HP today confirmed reports it will sack 8 percent of its global workforce under a two-year restructuring strategy.

The restructure will see 27,000 workers of the company’s 350,000 employees lose their jobs - the largest staff purge in HP’s 73-year history, reports AP.

HP will offer exiting staff early retirement packages to avoid layoffs. The company did not reveal which regions would be the hardest hit.

HP Australia declined to comment to CRN how the announcement would affect local workers. A spokesperson said the workforce reduction would impact most businesses and regions. 

The job cuts are expected to generate savings of $US3.5 billion, to be reinvested into the company under Whitman’s plan to “double down” on research and development. The company said in a statement it would reinvest the savings to boost investment in its key focus areas of cloud computing, big data and security.

Printing and personal systems will also benefit from a cash injection as HP battles to meet customer expectations and keep up with market trends. 

HP expects severance and other restructuring costs to come in at around $1.7 billion pre-tax before the end of its fiscal year in October. It predicts an additional $1.8 billion for fiscal year 2014.

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Whitman also announced Autonomy founder Mike Lynch will exit the company, with HP Software vice president Bill Veghte to take over his role.

Whitman said such measures were necessary to improve execution and fund the company’s long-term health.

“These initiatives build upon our recent organisational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business,” she said. “We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders.”

Reveals disappointing Q2

The PC maker today also announced its second quarter financial results, posting a $700 million decline in net earnings to $1.6 billion.

The results mark a 31 percent drop on the same period in 2011. HP’s Imaging and Printing group was the hardest hit, suffering a 10 percent drop in revenue year on year. Services revenue was down one percent, enterprise servers, storage and networking revenue declined 6 percent while PSG revenue remained flat.

HP’s software revenue jumped 22 percent and financial services also saw growth of 9 percent. 

Death of Compaq?

HP revealed it would conduct an internal review into the value of the Compaq business to its overall PC strategy. The PC maker acquired Compaq in 2002. 

The Verge reports HP will ditch its use of the "HP Compaq" combined brand, instead shifting the Compaq focus to basic PCs at entry-level pricing.

HP's embattled Personal Systems Group has undergone a difficult few years after former HP CEO Leo Apotheker announced its possible sale mid-way through 2011.

Upon her appointment late last year, Whitman ended a period of instability for the company’s partners and customers by announcing an internal review had found the division should remain in-house.

HP's cost-cutting plans pleased investors, with shares jumping over 11 percent to $23.50 in after hours trading today.

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