News

HP to Cut 14,500 Jobs

HP on Tuesday announced it is cutting 14,500 jobs worldwide -- about 10 percent of its total workforce -- in an ongoing effort to bolster the computer and printer firm’s bottom line.

• By Stuart J. Johnston
• July 19, 2005

The move is the first major initiative by the company’s new CEO, former NCR chief executive Mark Hurd, since he was recruited in March to replace Carly Fiorina, who was forced out by the board in February.

Hurd’s moves aim to simplify HP's management structure by embedding sales and marketing into business units, providing a tighter link with customers. In some respects, HP’s moves are reminiscent of IBM’s recent restructuring, announced in early May, of its European sales and marketing organizations.

HP plans to cut costs by restructuring support functions, eliminating redundancies and modifying HP's U.S. retirement programs, thus freeing funds for reinvestment in the business, according to a company statement. It also plans to streamline management by instituting a simpler reporting structure with fewer management layers.

"After a thorough review of our business, we have formulated a plan that will enable HP to begin delivering its full potential," said Hurd in a statement.

HP plans to implement the cuts over the next six quarters. It plans to begin reaping financial savings in fiscal 2007, with approximately $1.9 billion in ongoing savings. This will be comprised of $1.6 billion in labor costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion.

About half the savings will be spent on the business to offset market forces or reinvested in the business to strengthen HP's competitive position. The rest will be passed through as operating profit. HP will take pretax restructuring charges of about $1.1 billion over the next six quarters, beginning in the fourth quarter of fiscal 2005.

The company will dissolve the Customer Solutions Group (CSG) -- a standalone business group responsible for sales to enterprise, small and medium-size businesses and public-sector customers. It will merge those sales functions into three individual business units – the Technology Solutions Group (TSG), Imaging and Printing Group (IPG) and Personal Systems Group (PSG) in a move to give each business unit greater financial and operational control of its business.

As a consequence of the restructuring, executive vice president of CSG Michael J. Winkler will retire. HP also named three new executive vice presidents, expanding the company’s Executive Council to 10 members.

Cathy Lyons, a 26-year HP executive, was named executive vice president and chief marketing officer. Todd Bradley, formerly president and chief executive officer of palmOne, was named executive vice president of PSG. Randy Mott, formerly chief information officer at Dell, has joined HP as executive vice president and chief information officer.