Embattled tech giant Hewlett-Packard said Wednesday it would slash 27,000 jobs, 8% of its worldwide workforce, by 2014 in hopes of saving billions of dollars and reversing a financial funk amid brutal competition.
The multiyear restructuring plan, which aims to save $3 billion to $3.5 billion, is the biggest in HP's 73-year history and absolutely critical for the long-term success of the company.
HP is paring thousands of jobs because its revenue and profits are fading. The Palo Alto, Calif., company reported earnings of $1.6 billion, or 80 cents a share, for its second fiscal quarter, which ended April 30, down 30% from a year earlier. Revenue was $30.7 billion, down 3% from the same period a year ago. A consensus of Wall Street analysts forecast revenue of $29.92 billion and a profit of 91 cents a share. Investors liked what they heard. HP shares rose 9% in after-hours trading.
The workforce bloodletting is believed to be the third-largest in tech history. IBM shed 60,000 jobs in mid-1993, and AT&T laid off 40,000 in early 1996, according to analyst Phil Fersht of HfS Research. HP chopped 25,000 jobs in 2008. This is the start of a long process, and is likely not going to be the last workforce correction that will happen this year.
The cutbacks are the latest in a long, painful sequence for HP. The venerable PC giant jettisoned 50,000 jobs over five years under the former CEO. The cuts are especially vexing for the current CEO, who ran on a jobs-creation platform during her unsuccessful bid to become California governor in 2010. The layoffs are equivalent to the population of Eureka, Calif.
HP's revenue is being squeezed by a phalanx of competition from Dell, Apple, IBM and others on multiple product fronts. The projected slackening demand for PCs this summer won't help matters, nor will HP's lack of a tablet strategy.
Another former CEO had proposed jettisoning the PC business and emphasizing more profitable businesses, including commercial software and cloud computing. The new CEO nixed that idea, but she has said HP will continue to expand its software and services businesses.
HP expects to use the cost savings, which would include voluntary retirement, to increase investments in cloud computing, big data and analytics, and security.
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