HP May Cut 8-10% of Workforce Starting Next Week

News
By Kevin Parrish
published

HP is reportedly cutting a chunk of its workforce in order to reinvest.

Hewlett-Packard may cut its overall workforce by 8 to 10-percent, or a minimum of 25,000 jobs, starting next week. The details are slim for the moment, but a source close to the situation told Reuters that the cut may even include forced early retirements for around 5,000 people. The cuts are currently under discussion, and have not yet been finalized.

Bloomberg adds to the report, stating that the number includes 10,000 to 15,000 from HP’s enterprise services group. This department, which sells a range of information-technology services, has been beset by declining profitability.

The cut is part of newly installed CEO Meg Whitman's overall plan to return the Silicon Valley company back into positive growth. PC sales are reportedly dropping due to consumer favoritism towards tablets. The company has also been slow to shift away from IT services and focus on the current trend of cloud computing.

By eliminating 18,000 jobs, HP could save up to $1.2 billion, and add 50 cents to its annual per-share earnings. The company is reportedly working with management consulting firm McKinsey & Co. to draw up the job-cuts plan which Whitman is expected to reveal during the company's quarterly earnings call next Wednesday.

AllThingsD reports that the cuts won't be immediate: they will be carried out over a relatively long period of time, possibly a year or more. The exact number of the cuts is still unknown and considered a "moving target" that could grow or shrink before next week. Whitman is expected to say that the cuts are required to make needed investments.

"Whitman will argue that many of the cuts made at HP during the five years that Mark Hurd was at its helm were made without corresponding investments in new and growing initiatives," reports AllThingsD Arik Hesseldahl. "This 'cut and reinvest' theme will apply across the company, sources tell me. The process has been an intense one among HP’s senior executive ranks and has, as one source put it, 'consumed the company.'"

After the report of HP's possible job cuts surfaced, company shares dropped but then quickly rose upon news of restructuring. By 3pm EST shares were $22.10, and then $22.27 by the end of the day. The stock had already dropped 14-percent this year before Thursday's report.

Kevin Parrish
11 Comments Comment from the forums
  • wannabepro
    1 CEO's salary cut, saves 1 million. ^^^

    15,000 x $50k = $750,000,000

    The best way would be to cut corporate taxes.
    Reply
  • rdhood
    The best way would be to cut corporate taxes.
    Fail. You assume that HP would not cut those people if their corporate taxes were cut. They would cut anyway. HP has cut a hundred thousand jobs over the last 10 or 15 years, even in times of prosperity. I was laid of (everybody in my group) a few years ago, during a quarter in which HP came in "above expectations" and made billions. HP became a dysfunctional hire-and-fire company, starting with Carly Fiorina, and continuing through MW. Corporate taxes has got nothing to do with it.
    Reply
  • ananke
    Corporate taxes doesn't matter to a multinational corporation. The profits are expatriated to the lowest taxing territory anyway, through trade and accounting approaches, and taxes are minimized. The corporation eventually pays minimal taxes in the US, BUT the Americans employed pay income, wealth, sales etc. taxes. Hence, when you have loss of American jobs, the revenue to IRS goes down, regardless of the corporate taxation level. In fact, corporate and wealth taxes must be zero, if you want to compete with Swiss, Singapore, etc., and eventually rely only on personal tax revenue.

    Btw. I was working in HP finance at one point.
    Reply
  • svdb
    Wannabepro1 CEO's salary cut, saves 1 million. ^^^15,000 x $50k = $750,000,000The best way would be to cut corporate taxes. Nope. Companies like HP pay very little taxes already, about 16% after applying all the legal deductions that they successful lobbied for. Countries
    like Sweden and Denmark have way higher corporate tax rates (around 26% after deductions) and yet their unemployment rate is around 6% which means almost full employment.
    In the US less corporate tax = more money for the shareholder, not more jobs.
    Reply
  • eddieroolz
    Every company needs to cut some of its underproductive work force, that's a given.
    Reply
  • dark_knight33
    WannabeproThe best way would be to cut corporate taxes.
    I find it hard to argue with someone who cant see the truth past all the teabags dangling in their face.
    Reply
  • how about cutting out Ray Lane?
    Reply
  • svdb
    eddieroolzEvery company needs to cut some of its underproductive work force, that's a given.You're so right. Let's start with you!
    Reply
  • As an ex HPer, HP has been on a downward slide since it lost its way during the reign of Queen Carly. Dictator Hurd made things immeasurably worse by gutting R&D to pump up his bonus. Then you had crazy Leo and now Missy Meg. Missy Meg is all about talking reinvestment and big ideas like doing cloud and security but does nothing to make it happen. Of all the bad CEOs for HP, I am afraid Missy Meg may be the one that finally sinks the ship by dumping all the expertise overboard. You see, they are not laying off the second and third stringers from India, Costa Rica, Poland and China. They are dumping the experienced first stringers that made HP a great company. I expect an outcome very similar to what happened at Circuit City when their idiot CEO laid off any one making more than $8.25. Very sad to see HP go. Glad my HP pension is an annuity.
    Reply
  • GreaseMonkey_62
    Honestly, I think the best way to save money in a corporation is not to fire the thousands that contribute to the over all economy of a nation, but to cut the salary of the CEO or some top executive's salary by say.......1%......which could mean......1 million a year? :P
    I agree, the average CEO's salary of a company the size of HP, plus bonuses is in the millions. Start chopping away at executive salaries and bonuses (which they can earn even if the company isn't doing so well). Of course if a person's position isn't truly needed, ie they're making up stuff just to keep the person busy, I could see cutting them.
    Reply