HP to Cut 27,000 Jobs to Save Up to $3.5B Annually
SAN FRANCISCO (AP) - Hewlett-Packard Co. is cutting 27,000 jobs in an effort to recover from management missteps that hobbled the Silicon Valley pioneer as its rivals raced ahead with more innovative products and services.
The streamlining announced Wednesday represents HP’s largest payroll purge in its 73-year history. About 8 percent of HP’s nearly 350,000 employees will be gone by the time the overhaul is completed in October 2014.
The cuts come eight months after HP hired Meg Whitman as CEO 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 said it will avoid as many layoffs as possible by offering early retirement packages. And word of the cut had leaked out in media reports late last week, so the news didn’t come as a surprise.
Nevertheless, the sobering details 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 told analysts during a conference call.
Echoing comments she made three months ago, Whitman cautioned that "turning HP around is going to be a lot of hard work. It’s going to take time. But we know what needs to be done."
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. That’s still about half their value 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, who cut research and development to boost profits, 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 more innovation.
HP, which is based in Palo Alto, Calif., has been struggling to sell more personal computers and printers, partly because they aren’t needed as much now that people are spending so much time surfing the Web on phones and tablets such as Apple Inc.’s iPad. 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.