The brutal string of job cuts over the past several years at Hewlett-Packard will continue after the company splits in two in November.
At a meeting with analysts in San Jose, Calif., Sept. 15, HP executives said that once the tech vendor breaks apart, the two companies that come out of the split—Hewlett Packard Enterprise and HP Inc.—will undergo more layoffs as they look to reduce expenses. The executives were laying out what the two companies will look like going forward.
According to Tim Stonsifer, who will be CFO of Hewlett Packard Enterprise after the split, the new company will slash 30,000 jobs, a move that will save $2.7 billion in annual costs. According to reports, Cathie Lesjak, who will be CFO of HP Inc., told the analysts that her company will reduce headcount with another 3,300 layoffs.
Those layoffs will come on top of the 55,000 job cuts that HP has undertaken over the past several years as President and CEO Meg Whitman restructured a company that was falling behind such rivals as IBM and Cisco Systems. According to Whitman, who will become CEO of Hewlett Packard Enterprise after the vendor breaks in two Nov. 1, the latest layoffs should put Hewlett Packard Enterprise in good enough shape to avoid future cuts.
“Hewlett Packard Enterprise will be smaller and more focused than HP is today, and we will have a broad and deep portfolio of businesses that will help enterprises transition to the new style of business,” she said in a statement. “These restructuring activities will enable a more competitive, sustainable cost structure for the new Hewlett Packard Enterprise. We’ve done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring.”
Come Nov. 1, two new companies will be born from the breakup of HP. Hewlett Packard Enterprise will focus on enterprise IT solutions and services, while HP Inc. will sell PCs and printers. The two will continue to work closely together, but not exclusively. Dion Weisler, currently executive vice president of HP’s printers and PC unit, will be CEO of HP Inc. after the split. Whitman has said that each of the new companies will generate more than $50 billion in revenues.
While the headcount reduction will save Hewlett Packard Enterprise money, it will come at a cost. According to Stonsifer, the new company will have to pay a $2.7 billion restructuring charge. In addition, there will be a cash impact of about $2.6 billion over the next three years, starting in the next fiscal year, officials said.
The bulk of the job cuts will come out of the company’s struggling Enterprise Service group, which has seen revenue declines over the past several quarters. In the second quarter, revenue for the group fell 11 percent over the same period in 2014. Infrastructure technology outsourcing revenue declined 13 percent, while application and business services sales dropped 7 percent.
Enterprise Services is based primarily on the EDS business HP bought in 2008 for $13.9 billion, a deal that cost HP another $8 billion in 2012 when the company had to pay a charge due the falling value of the unit. Earlier that year, HP had announced around of 27,000 job cuts, with most coming out of the Enterprise Services unit.
Despite the group’s struggles, Hewlett Packard Enterprise will rely on the services unit going forward. Mike Nefkens, executive vice president and general manager of Enterprise Services, said revenue for the unit in fiscal 2016 will be flat to down 2 percent, though operating margins should improve. About 37 percent of Hewlett Packard Enterprise’s overall revenues will come from Enterprise Services, Nefkens said in a statement.