HP to cut up to 30,000 more jobs as US tech giant splits

A man walking past a Hewlett-Packard (HP) logo.
A man walking past a Hewlett-Packard (HP) logo. PHOTO: REUTERS

SAN FRANCISCO (BLOOMBERG) - Hewlett-Packard, the technology company splitting into two separate entities, said it will cut 25,000 to 30,000 more jobs as chief executive officer Meg Whitman tries to refashion the business for a rapidly changing technology market.

The company will incur a charge of about US$2.7 billion as part of the restructuring, HP said Tuesday (Sept 15) at a meeting with analysts. The company had previously disclosed US$2 billion in probable cost cuts at the services division within Hewlett Packard Enterprise, and has found an additional US$700 million in savings across the operation, said Tim Stonesifer, chief financial officer of Hewlett Packard Enterprise.

The additional cuts will "be things such as site closures and the reductions of those, and further reductions of workforce across the broader portfolio," Stonesifer said at the event. The cuts announced Tuesday, in addition to 54,000 that have already taken place, are the most among North American companies this year, according to data compiled by Bloomberg.

HP is scheduled to break into two distinct entities in November, with one named Hewlett Packard Enterprise supplying businesses with high-end technology, and the other, HP Inc., selling personal computers and printers. The split, announced last October, is designed to enable each company to be better positioned in their respective markets.

"We have an opportunity to be more successful as two companies than we would as one," Ms Whitman said at the event. "We'll read the winds of change and we'll course correct faster."

Ms Whitman is scheduled to become president and CEO of Hewlett Packard Enterprise while serving as board chairman of HP Inc.

HP employed almost 350,000 workers at its peak in 2011, many of them added through the 2008 acquisition of computer-services provider Electronic Data Systems Corp. In fiscal 2007, the company had 172,000 workers, according to data compiled by Bloomberg.

The reductions announced Tuesday represent about 10 per cent to 12 per cent of the estimated 250,000 people expected to be employed by the enterprise half of the company after the split.

The company's enterprise services business has lost about US$4 billion in annual revenue since 2011. At the event, Ms Whitman likened the losses to water draining from a bathtub.

"A big step forward would be if enterprise services can stop shrinking," she said. "Before you can grow you have to fill the bathtub up."

HP executives suggested that they've made enough changes to enterprise services to stem the bleeding. In 2013, three accounts represented 65 per cent of the division's total operating profit, said Mike Nefkens, general manager of enterprise services. "Today, no single account represents more than 10 per cent," he said.

It's also shifting employees to low-cost areas, and hopes to have 60 per cent of its workers located in cheaper countries by 2018, Mr Nefkens said.

"We're exiting labor in high-cost countries," he said. "Our current workforce rebalancing will eliminate the need for further corporate restructuring."

HP has been telegraphing its shift to outsourcing for months, with Ms Whitman saying in June that "there might be a slight movement to more locations outside the US."

The company expects to generate US$3 billion in sales relating to cloud computing this year, Ms Whitman said, and sees that growing by 20 per cent year-over-year for the next three years. It anticipates generating free cash flow of US$2 billion to US$2.2 billion in its 2016 financial year, which begins in November.