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Hewlett-Packard executives are upping the number of jobs cuts that will be part of the company’s multiyear turnaround efforts, saying now that 34,000 jobs will be gone by the end of 2014.
The giant tech vendor outlined the numbers as part of its annual report filed Dec. 30 with the Securities and Exchange Commission (SEC), blaming the increase on “continued business and market pressures.” The move will mean HP, with a workforce of more than 317,000 people, will reduce its overall headcount by more than 11 percent.
The layoffs are part of a larger five-year plan outlined by CEO Meg Whitman in October 2012 to restructure the company, expand into high-growth markets and reduce costs by as much as $3.5 billion. The original goal was to see revenue growth by 2014. However, Whitman said about five months ago that there would be no revenue growth this year, which told Gartner analyst Neil MacDonald that there would be adjustments in the restructuring plan. The increased job cuts are part of the adjustments, according to MacDonald, Gartner’s lead HP analyst.
“It’s an indication that the turnaround is taking longer than Meg Whitman expected,” MacDonald told eWEEK.
In the SEC filing, HP officials expect the increased number of job cuts will lead to restructuring charges of $4.1 billion at the end of the company’s fiscal 2014. About $3.5 billion will be related to the job losses, with about $600 million tagged to infrastructure, such as data center and real estate consolidations.
HP, like other major tech vendors, is looking to expand its portfolio as its deals with pressures in such core businesses as PCs, servers and printers. HP is aggressively moving into such areas as cloud computing and networking, but is still feeling the impact of such trends as the growth of smartphones and tablets and the migration of server workloads into the cloud, with some cloud service providers building their own servers or working with original design manufacturers (ODMs). The impact of such trends have been more significant than HP officials had expected, and there is no indication that these trends will change, MacDonald said.
Whitman has said she is pleased with the progress of HP’s turnaround plan, though acknowledging that the challenges are still significant.
“As we said when we laid out our five-year plan, we expected that our turnaround would not be linear and we saw that during the year,” Whitman said in a conference call with analysts and journalists in November when addressing fiscal fourth-quarter financial results. “However, as I reflect on the key priorities we outlined at the beginning of 2013—driving innovation across HP, improving operations, aligning our cost structure and rebuilding our balance sheet—we made great progress. We also saw some positive momentum in our execution leading to pockets of revenue growth in key areas in Q4.”
HP Job Cuts Will Hit 34,000 by End of 2014
However, during the same call, Chief Financial Officer Cathie Lesjak also indicated that the number of layoffs could outpace the 29,000 the company initially outlined. Lesjak said that, as of November, about 24,600 workers had left the company—more than half of them leaving during fiscal 2013. She also said that the plan was that at the end of 2014, job cuts would be “at the high end of our range, so 29,000 plus 15 percent, so somewhere between 33,000 and 34,000 people.”
HP is working to grow its own mobile business, pushing out tablets and promising to get back into the highly competitive smartphone space. However, MacDonald said HP can still make gains in businesses that are under the most pressure. He noted that while the use of printers and number of pages being printed are declining as more content sharing is done over the Internet, HP has still been able to improve profit margins and grow market share.
HP could have similar success in PCs if it is able to steal business away from competitors like Lenovo and Dell, he said. In addition, HP could take advantage of what Gartner analysts see as a bifurcation in the server space, with growth in the hyperscale market in the low end and increasing demand for converged infrastructures—which offer servers, storage, networking and management software in a tightly integrated package—by enterprises in the high end. HP is one of the few vendors big enough to address both extremes, MacDonald said.
HP board members seemed to be pleased with Whitman’s efforts. When she took over as chairman and CEO in 2011, Whitman said her salary would be $1—not including stock options and bonuses. In December, HP announced the CEO’s salary would grow from $1 to $1.5 million a year.