HP to cut up to 30,000 jobs, mostly in services

On verge of splitting into two companies, HP restructures once again

Hewlett-Packard is cutting 25,000 to 30,000 jobs in its enterprise division because of revenue declines. Most of the personnel cuts will be in its enterprise services unit, whose employees often work directly with HP corporate customers.

An HP official, who asked not be named, disputed any notion that customers would be affected by the cutbacks. "We think we are actually improving our ability to serve our customers and partners by focusing on cost," he said. The customer relationship "is the most important relationship that we have and we wouldn’t be doing anything to hurt them."

The cutback is happening as HP is due to split into two firms, when it separates its enterprise division from its PC division as of Nov. 1.

HP is expecting to make some new hires to offset this reduction as it "reshapes" its workforce. How many layoffs or new hires will be in the U.S. is in question.

The action is expected to take $2.7 billion in annual costs out of the business. HP had 302,000 employees as of last October, the end of its previous fiscal year.

There is a risk that some HP customers may not be pleased with the layoffs, especially if longtime, face-to-face relationships are severed, said Charles King, an analyst at Pund-IT.

"Even if you don't end up getting your pink slip, I expect there is going to be a lot of resume polishing at HP over the next few months," said King.

HP has been reporting a steady decline of profits and revenue. In its most recent quarter, HP revenue was down 8% to $25.3 billion.

Meg Whitman, HP's CEO, told analysts that "a big step forward" for HP will be if "enterprise services can stop shrinking."

The goal of the cuts appears to get the enterprise services "flat to down slightly," and from that point it should grow, said Whitman. Demand for services is growing, with services bookings -- "a forward indicator" -- up at 3% she said.

In 2012, HP announced plans to cut its workforce by 55,000, a reduction that has continued to roll out. This brings to 85,000 the number of cuts since Whitman took over in 2011.

HP, as well as other enterprise services providers, has been hit by a shift to public and private cloud services, said King.

HP's services organization took a dramatic leap in size when it acquired EDS in 2008. It added 139,000 employees to HP, but HP soon began cutting its staff. "That acquisition has never really paid off in the way I think HP thought it would," said King.

Copyright © 2015 IDG Communications, Inc.

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