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HP to cut workforce by 3,000

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Hewlett-Packard plans to eliminate 3,000 jobs over the next few years as it ramps up its use of automated data centers for business customers, the company announced Tuesday.

The world's largest computer company said it will invest $1 billion in building up its automated data centers to service business customers. HP will cut about 9,000 jobs in its enterprise services division as a result, but over the same time period, the company expects to add about 6,000 employees to its sales and delivery teams.

HP (HPQ, Fortune 500) will take a charge of about $1 billion to reflect the investment, and expects it to pay off in annual savings of about the same.

After reinvesting some of that money, HP expects these moves to boost annual pre-tax earnings by between $500 million and $700 million by fiscal year 2013.

HP significantly built up its business services division with its $13.9 billion acquisition of tech firm Electronic Data Systems in August 2008. The 9,000 job cuts mark the second phase of the EDS integration.

"It's not a big change from HP's playbook," said Keith Bachman, an analyst with BMO Capital Markets.

HP consistently streamlines its various divisions, especially after major acquisitions, Bachman said. Plus, cuts to the enterprise services division make sense as tech companies consistently report "less than stellar revenue growth" in services compared with other businesses like hardware sales, he said.

In HP's latest fiscal quarter, revenue from the enterprise services division grew 2.5% over last year, whereas sales from personal computers was up 21.3%.

When HP first announced the EDS integration, it said it would lay off 25,000 employees, resulting in annual cost savings of about $1.8 billion.

The EDS integration is ahead of schedule and the company has since realized the savings it expected from those job cuts, Cathie Lesjak, HP's executive vice president and chief financial officer, said in a call with investors Tuesday.

After completing the first phase of its EDS integration, HP realized there's "another wave of opportunity to modernize, simplify, standardize and automate services," she said.

Meanwhile, HP would not disclose the exact timeframe or geographical locations of the future job cuts.

The Palo Alto, Calif. based company has about 300,000 employees and last month, announced its second quarter profit climbed 28% to $2.2 billion, boosted by growing demand for personal computers from both businesses and consumers.  To top of page

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