HP Shutters German Site as Part of Larger Services Restructuring

HP’s decision to close the site and lay off 850 employees is connecting with the company’s plans to remake its Enterprise Services unit.

Hewlett-Packard's aggressive plans to revamp its Enterprises Services business and restructure the entire company are resulting in the shutting down of a site in Germany and the laying off 850 people.

In a statement released Feb. 1, HP officials said the move to close the facility in Ruesselsheim, Germany, is part of a larger effort by the company to get back on more solid financial footing after several quarters of disappointing financial results and a stock price decline of more than 50 percent since Mark Hurd left as CEO in 2010.

In October 2012, CEO Meg Whitman outlined a multi-year turnaround plan for the tech giant, which has been hampered by mismanagement, constantly changing leadership and a worldwide PC market that is seeing sales contract rapidly as consumers buy more tablets and smartphones. Part of that turnaround plan includes 29,000 job cuts—HP has more than 300,000 employees—with a significant portion of the layoffs reportedly falling on the Enterprise Services unit.

The shuttering of the facility in Germany is part of that effort to restructure Enterprise Services. The 850 job cuts represent about 8.5 percent of HP's work force of 10,000 in Germany. Those people will be able to apply for positions at other HP sites, the company said. The 250 or so employees at the site who aren't losing their jobs will be able to transfer to positions with HP partners or clients.

"As we described during our securities analyst meeting in October, HP Enterprise Services has an aggressive plan to optimize its portfolio and its sales and delivery model, and to improve its cost structure, resource management and operations," Mike Nefkens, executive vice president of HP Enterprise Services, said in a statement. "The changes we are announcing in Germany today are a necessary part of our commitment to deliver our long-term operating model."

The plan for turning around HP's Enterprise Services business is based on what the company calls "four pillars," including core portfolio improvements and expanding the offerings in such high-growth areas as cloud and information management, and giving account executives more authority and accountability. In addition, HP officials are looking to improve the cost structure by focusing more on account performance and improving operations.

Among the problems hindering HP has been big acquisitions that have not worked out as hoped. That includes the company's $13.9 billion acquisition of services vendor EDS Systems in 2008, a move that HP officials had hoped would enable the company to better compete with IBM Services and help broaden HP's enterprise technology portfolio.

In August 2012, officials with HP, the world's top PC vendor, announced that the company would have to pay an $8 billion charge due to the Enterprise Services business underperforming since the EDS acquisition. That came on top of the $1.5 billion to $1.7 billion charge the company was taking for the planned job cuts, more than half of which reportedly will come from the Enterprise Services business, which grew following the acquisition.

A couple of months later, HP announced that it would take another $8.8 billion charge in connection with its $11 billion acquisition of Autonomy. The software maker's executives are accused of accounting irregularities in the runup to the acquisition, an accusation that former Autonomy CEO Mike Lynch has stridently denied.