Hewlett-Packard Is Planning Massive Job Cuts
Hewlett-Packard Co, which plans to split into two listed companies this year, said it expected to cut about 33,300 jobs over three years as the tech pioneer adjusts to falling demand.
The latest cuts, on top of 55,000 layoffs previously announced under Chief Executive Meg Whitman, will mostly be in HP's faster-growing corporate hardware and services operations, to be spun off as Hewlett Packard Enterprise, or HPE, on Nov. 1.
The latest cuts indicate a reduction of the company's total workforce by at least 10 percent, based on its most recent number of more than 300,000 employees as of Oct. 31, 2014, and reflecting the previously announced reduction of 55,000.
Up to 30,000 of the layoffs will be in the enterprise business and up to 3,300 in HP Inc, the company that will continue to make personal computers and printers, HP said in a regulatory filing on Wednesday.
The restructuring will result in pretax charges of about $2.7 billion at HPE and $300 million at HP Inc, which has been hit hard by a relentless decline in sales of PCs.
The charges will be taken between the current quarter and the end of fiscal 2018, ending Oct. 31.
"We've done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring," Whitman said in a statement on Tuesday when HP announced forecasts for the two new companies.
Job cuts have become a way of life at HP in recent years as the company digested a series of acquisitions that failed to revive its fortunes.
"The number is sadly larger than some people might have expected, but I think it's a reflection of how much trouble HP has been having with its services," Charles King, president of Pund-IT, a Silicon Valley IT consulting firm.
Chief Financial Officer Cathie Lesjak said last month that HP expected the previously announced job cuts of 55,000 to increase by up to 5 percent by the end of October.
HP said it was moving more of its workers to lower-cost locations as part of its efforts to cut costs.
In its 2013 fiscal year, the company said 36 percent of its employees in enterprise services worked in what it called low-cost locations. This year 42 percent do, and executives said they plan to increase that percentage to 60 percent by 2018.
In its fiscal third quarter ended July 31, HP's revenue from its PC and printer business, its largest, fell 11.5 percent.
HPE, which will be run by Whitman, will have revenue of more than $50 billion, and is expected to report an adjusted profit of $1.85 to $1.95 per share in 2016, HP said on Tuesday.
The business is expected to report free cash flow of $2.0 billion to $2.2 billion in 2016, at least half of which is expected to be returned through dividends and share buybacks.
HP said it expected the market for PCs and printers to remain tough for "several quarters" and forecast 2016 earnings for HP Inc of between $1.67 to $1.77 per share, excluding items.
The business is expected to report free cash flow of $3 billion to $3.3 billion in 2016, at least half of which is expected to be returned through dividends and share buybacks.
HP shares were up 0.9 percent at $27.35 in premarket trading on Wednesday. The stock fell 1.4 percent in extended trading on Tuesday after the release of the forecasts.
Maxim Group analyst Nehal Chokshi blamed the initial market reaction on the cash flow target for HPE, which he said looked short of the contribution needed to meet analysts' forecasts.