Hewlett-Packard Co. (HPQ:US) is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
The number to be cut includes 10,000 to 15,000 from Hewlett-Packard’s enterprise services group, which sells a range of information-technology services and has been beset by declining profitability (HPQ:US), said these people, who asked not to be identified because the plans aren’t final and may change.
Meg Whitman, chief executive officer since September, is seeking to reverse the growth slump that led to the ouster of her predecessor, Leo Apotheker. The company’s PC sales are dropping as consumers favor tablets, such as Apple Inc.’s iPad, and it has been slow to adapt to the shift toward cloud computing, away from the IT services Hewlett-Packard provides.
“Hewlett-Packard could make the difficult decision of announcing” a workforce reduction, Brian Marshall, an analyst at ISI Group, wrote in a research note earlier this month. This “would enable investments in strategic, higher growth areas.”
Eliminating 18,000 jobs could result in savings of about $1.2 billion and add 50 cents to annual per-share earnings, he estimated.
Michael Thacker, a spokesman for Palo Alto, California- based Hewlett-Packard, declined to comment.
Shares of Hewlett-Packard rose to as high as $22.27 after Bloomberg reported the changes, and gained 3 cents to $22.06 the close in New York. The stock (HPQ:US) has dropped 14 percent this year.
Early Retirement Offers
Some of the cuts to Hewlett-Packard’s workforce of 324,600 may come through early-retirement packages, the people said. Hewlett-Packard may offer early retirement to several thousand people, the people said.
The overall reduction and additional cost savings throughout the company could result in savings that reach billions of dollars, one person said.
Hewlett-Packard, the world’s largest maker of personal computers and printers, is working with management consulting firm McKinsey & Co. to draw up the job-cuts plan.
Whitman, former CEO of EBay Inc., said in March that she’ll combine the PC and printing divisions, ending deliberations to spin off the PC unit. She has also said she’ll step up investment in research and development and take steps to shore up Hewlett-Packard’s balance sheet.
Besides tussling with Apple, Hewlett-Packard is also vying with companies including International Business Machines Corp., Oracle Corp. and Cisco Systems Inc. in the market for hardware, software and services for large corporations.
More Declines Predicted
Hewlett-Packard in February forecast sales for the quarter through April that fell short of analysts’ predictions. Sales in the current year may decline 4 percent to $122.4 billion, according to average analyst predictions (HPQ:US) compiled by Bloomberg.
The enterprise services group includes the 2008 acquisition of Electronic Data Systems for $13.9 billion made by former CEO Mark Hurd.
Hurd, who was CEO from 2005 to 2010, reduced costs through actions including a 5 percent pay cut for most employees in 2009, lower research spending and plans to eliminate at least 48,000 jobs.
Hewlett-Packard is scheduled (HPQ:US) to report fiscal second- quarter earnings on May 23.
Hewlett-Packard plans “significant” layoffs and seeks to cut its workforce by 10 percent to 15 percent, Business Insider reported yesterday, citing an unidentified person.
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