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