HP Earnings Decent, But It Will Cut 27,000 Jobs by 2014

By Chris Preimesberger  |  Posted 2012-05-23 Print this article Print

"We continue to face a weak overall demand environment," CEO Meg Whitman said on the quarterly results call to analysts.

Hewlett-Packard on May 23 had perhaps its newsiest day since Aug. 18, 2011, when it announced it would cut its webOS division and Personal Systems Group and buy Autonomy for $10 billion.

The news this time was no less important, as the slumping IT products and services provider announced better-than-expected quarterly earnings but also said it plans to trim about 27,000 full-time jobs--or about 8 percent of its workforce of 349,600--over the next two years.

The layoffs, when completed at the end of fiscal 2014, will mark the highest such number in the company's 73-year history.

Many of those cuts--possibly 15,000--will come at the company's Texas-based HP Enterprise Services division, formerly known as Electronic Data Systems, or EDS. HP bought EDS, which was founded in 1962 by H. Ross Perot, for $13.9 billion in 2008. The Palo Alto, Calif.-based company said it expects to save as much as $3.5 billion per year from the job cuts and other internal fiscal measures.

Better-Than-Expected Fiscal Report

Meanwhile, HP reported lower but better-than-expected second-quarter 2012 fiscal results, and its stock shares rose 11 percent in after-hours trading. HP shares rose to $22.35 after hours, after closing down 3.2 percent at $21.08.

The company reported second-quarter net income of $1.59 billion (80 cents a share), compared with $2.3 billion ($1.05 a share) in the second quarter of 2011. Revenue of $30.69 billion was down 3 percent compared with the same period last year.

HP said shareholders earned 98 cents a share, compared with analysts' average estimate of 91 cents, according to a group of Thomson Reuters analysts.

CEO Meg Whitman said the company will invest cost savings from the cutbacks into developing more products and services that fit current IT trends, such as data mobility, big data storage and security, networking and data analytics.

"While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long-term health of the company," Whitman said on a conference call to analysts.

The Palo Alto, Calif.-based company also revealed that it has replaced Autonomy founder and CEO Mike Lynch with HP's chief strategy officer Bill Veghte, because Autonomy hasn't been performing as well as had been expected.

Other Divisions' Sales Weak

Results from most of HP's divisions were off. The Personal Systems Group, which makes PCs of many types, reported flat sales. HP's printing group, which is being merged with the PSG, saw sales fall 10 percent due to weak consumer and corporate demand.

Sales of enterprise servers, storage and networking equipment dropped 6 percent from a year ago. "We continue to face a weak overall demand environment," Whitman said.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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