Posted by: Cliff Edwards on September 15, 2008
The bad news keeps coming for America’s workers. Hewlett-Packard announced Sept. 15 it plans to slash 24,600 jobs, or 7.5% of its global work force, in the next three years as it integrates outsourcing company Electronic Data Systems into its sprawling operations. Nearly half of the cuts will be in the United States, HP said.
Analysts have wondered recently whether Hurd can continue the startling revenue and profit gains the company has made under his tenure. The company has already undergone a massive restructuring after buying 30 companies in the past four years and aligning them to attract both businesses and consumers. Its consumer lineup and focus on notebook design has helped it attract new fans and hurt Dell and other pc rivals. Meantime, HP is seeking to continue its impressive growth by moving to take on services giant IBM and others. But HP’s stock, which closed at $45.33 on Monday, is off its 52-week high of $53.48 a share amid concerns of a slowdown in business spending.
HP sees a number of redundancies in the EDS acquisition, including in corporate, real estate, information technology and procurement. At the same time, the company said in a statement that it aims to hire about 12,000 people over the next three years. “As easy as it is to put numbers to a piece of paper, there’s a human aligned to every one of them,” CEO Mark Hurd told analysts on Monday.
HP will be recording a charge of $1.7 billion in the fourth quarter of fiscal 2008 relating to the restructuring program, $1.4 billion of which will be recorded as goodwill and $0.3 billion of which will be recorded as a restructuring charge that will be included in HP’s GAAP financial results.
The announcement comes amid belt-tightening from consumers and businesses who already are grappling with high gas prices, global economic turmoil and the aftermath of a housing crunch. But despite the deepening malaise in the tech sector and overall economy, Hurd still sees room to help the company gain market share and boost profits.
HP executives in a security analysts meeting on Monday said the enterprise market would grow 6% to $451 billion by 2010 as customers move to virtualization in data centers and cloud computing. The company says it can help companies even in uncertain times by automating and managing through its EDS acquisition many of the labor-intensive processes of today.
Yet, HP and other tech giants may be forced to cut even more in coming months, given the implosion of Wall Street financial pillars Lehman Brothers and Merrill Lynch, as well as problems with insurer AIG and Washington Mutual. Financial services firms are among the largest purchasers of information technology and services.
HP executives say they believe that customers in just about every sector to whom they sell hardware, software and services will increasingly depend on the company’s broad swath of offerings.