July 19, 2005 5:54 AM PDT

HP printing out 14,500 pink slips

Facing increased pressure to break out of its No. 2 position, Hewlett-Packard has been forced to reinvent itself once again.

As part of its strategy, the computer and printer maker said Tuesday that it will lay off 14,500 workers, or about 10 percent of its staff, under a restructuring plan designed to bring the company's costs in line with those of competitors like Dell and IBM.

HP said the broad changes will save it about $1.9 billion each year starting in the summer of 2006. In its current fiscal year, the company expects to save between $900 million and $1.05 billion.


What's new:
HP announces a massive restructuring including layoffs of 14,500 employees.

Bottom line:
The layoffs are designed to save HP more than $1.9 billion each year in operating costs. HP has laid off about more than 3,000 employees so far this year. In April, 1,900 employees took advantage of a voluntary severance plan in the imaging and printing division.

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Although the job cuts announced Tuesday will be felt throughout the company, the majority of staff reductions will come from sales and from support functions, such as IT, human resources and finance, Palo Alto, Calif.-based HP said.

"Our goal is to create a simpler and nimbler HP," Chief Executive Mark Hurd said during a conference call Tuesday, noting that the changes will be staggered over the next 18 months.

The restructuring is the most significant move Hurd has made since he replaced Carly Fiorina less than four months ago.

Employees are not expected to be immediately notified of their status but may get a greater sense of their place at the printer and computer maker sometime later in the week--after HP executives convene for more high-level discussions. Executives met over the weekend to nail down the number of layoffs and to decide which departments would be most affected, according to a source close to the company.

The announcement was telegraphed so far in advance that some employees had begun referring to the restructuring and layoffs as "The Big One."

HP currently has 150,000 employees, the same as it did 18 months after completing its acquisition of Compaq Computer.

As previously expected by some analysts, HP is also putting a freeze on its pension and retiree medical-program benefits for employees who do not meet defined criteria based on age and years of company service, starting in January 2006. Instead, the company said it will boost its matching contribution to most employees' 401k plans to 6 percent from 4 percent.

Mark Hurd

The $1.9 billion in expected annual savings is split between $1.6 billion in labor costs and $300 million in benefits expenses.

HP said it expects to spend about $1.1 billion over the next year and a half on the restructuring, excluding a $100 million restructuring charge announced earlier this year.

The company said it will also dissolve its Customer Solutions Group, a standalone division that had been responsible for sales to corporations, small and medium-size businesses and public-sector customers. Instead, HP said it will merge its sales teams into the company's three main business units. Senior sales positions will be added to each business segment.

At the same time, Michael Winkler, 60, will retire from his position as executive vice president of the group, the company said. Winkler had been trying to retire for some time, after nearly 10 years at HP and Compaq and more than 35 years in the industry, a representative with HP said.


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I'm just trying to guess: did HP after merger with Compaq layed off as much people as it gained during the merger?

I find it funny that such corporate America adopted such sily policies. It seems that middle management have no control at all over situation. Shareholders shuffle top management. Top management jump onto board, and try to kick start company. Normally they fail. Shareholders shuffle top management again. And doomed circle is closed.

Why big companies pay so little attention to middle management? This is the people closest to development, products and spendings.
Posted by Philips (400 comments )
Reply Link Flag
Indicative of the Real problem in corporate boardrooms.
No one in corporate America can see past this quarters' earnings report. Having a long range strategic goal that focuses on providing goods and services desired by those annoying customers never seems to factor into the equation. Apple seems to be the only tech company with any imagination or spirit.
Posted by (1 comment )
Link Flag
Same Sentiments Re Middle Management
Ho, hum. Since Hurd already got his reward, he has to satisfy the blood lust of the Board of Directors.

And so, he fired 10% of the people making individual contributions, probably actually putting their responsibilities on the remaining.

It's a failed strategy, played out at many old-line US companies already, and I wonder why Wall Street continues to award the Boards for their short-sightedness.

Here's the thing: if these folks weren't contributing something (which I suggest is unlikely), why were they still there? Why didn't day-to-day managerial analysis relieve the problem?

If they had 14,500 non-contributors on-board, the fundamental culture of the company is the problem: the management caste (which surely will largely survive) just couldn't get it done. So, it's the middle management that's at fault, and erasing workers who probably worked hard at what they did, will probably affect customer service, new product development, product quality, pricing.

Already HP is behind Dell in many of their common markets. They don't compete everywhere, but everywhere they do compete, HP will be hindered by the fear and overwork of the survivors of this purge.
Posted by pmchefalo (135 comments )
Link Flag
And their new CIO gets paid at least $15.3 million?
Wow! I just re-discovered my career path!

"Mott, who before becoming CIO at Dell spent 22 years at Wal-Mart Stores, will have a base salary of $690,000, an option to buy 500,000 shares of HP common stock and a targeted short-term bonus opportunity of 100 percent of base salary guaranteed at target for the remainder of fiscal 2005 and fiscal 2006, according to the filing.

Randall Mott"In order to replace benefits that Mr. Mott is forfeiting by leaving his current employment, HP also agreed to provide a signing bonus of $2.2 million," HP, the No. 2 computer maker after IBM, said in the filing."
Posted by (16 comments )
Reply Link Flag
Independence is the key to long term success.
This move is expected from the Management of American Companies. The key to security comes from your ability to produce in the real world, not some corporate job. I found that out in 1976.

We have a company of personnel working together through a limited partnership agreement and the corporation is owned by the active partners.

We are looking for personnel for nearly every city in North America. If you are looking to have security based on your ability to produce, contact me at Technology USA.

Ed Shaffer

Technology USA
13455 Noel Road, Suite 310
Dallas, TX 75240
Posted by EdShaffer (19 comments )
Reply Link Flag
HP Cuts 14,500 Jobs
Posted by mlsolomon (1 comment )
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Can't say that it will matter much...
But based on this news, I'm not buying an HP product again.
Posted by GGGlen (491 comments )
Link Flag
Last throes
Dick Cheney misspoke. He said that the insurgency in Iraq was in its last throes. What he meant to say was that H-P is in its last throes.
Posted by twasserman (11 comments )
Reply Link Flag
15 million for executive while 14,500 laid off. Thanks HP for simplifying the choice of my next computer by eliminating yourself.
Posted by mcc777c2 (1 comment )
Reply Link Flag

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