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HP expected to announce massive layoffs

Posted: 20 Jul 2005 ?? ?Print Version ?Bookmark and Share

Keywords:digital camera? printer? computer?

Hewlett-Packard is widely expected to cut thousands of jobs as part of a long-expected restructuring that will attempt to bring the computer maker's costs in line with business and its rivals' numbers, according to industry analysts.

The exact timing and number of layoffs isn't known, though observers speculate layoffs could range between 5,000 and 25,000 positions. The huge company, whose offerings range from digital cameras and printers to computers and corporate consulting, has 150,000 workers worldwide.

Shares of HP gained 32 cents, or 1.3 percent, to close at a 52-week high of $24.94, in Friday trading on the New York Stock Exchange. The stock has gained about 15 percent since HP named NCR executive Mark Hurd as its new chief executive in late March, replacing the ousted Carly Fiorina.

Hurd has made no secret of his intent to reduce expenses at the Palo Alto, Calif.-based company. In May, he told financial analysts that HP's cost structure is "off benchmark in many areas."

Alexa Hanes, an HP spokeswoman, declined to comment Friday on "rumors and speculation." Some HP workers have taken to calling the upcoming news "the Big One," according to the San Jose Mercury News.

In a research report Thursday, Moors & Cabot analyst Cindy Shaw said a management reorganization could be announced as early as Monday and could include as many as 25,000 job cuts. She also said the company might announce the expected retirement of Chief Financial Officer Bob Wayman.

Shaw did not provide details of how she obtained that information.

In June, Sanford C. Bernstein & Co. analyst Toni Sacconaghi estimated the job cuts would range between 7,500 and 15,000 with HP enterprise and services division "likely to present the biggest opportunities."

He also said HP's research and development spending is nearly $1 billion higher than the sum of its relevant competitors.

"We think HP is rife with cost improvement opportunities," Sacconaghi wrote in the research report, adding the company could realize annual savings of between $750 million to $1.5 billion.

Richard Chu of SG Cowen & Co. said it's likely between 10,000 and 15,000 jobs will be cut in the upcoming announcement. Chu expects cost reductions of $1 billion for fiscal 2006 and about $1.4 billion the following year.

HP's core strength is in printers and imaging, but it wants to diversify. The problem is that it faces competition from super-efficient Dell in low-end offerings such as personal computers. At the same time, it competes against well-established IBM in the more profitable area of enterprise hardware and services.

Since joining HP, Hurd has made several changes, though none is expected to have the impact of the expected major cost cutting.

Earlier this week, Dell's chief information officer was hired to fill the same position at HP. Last month, Hurd split HP's personal computer and printer divisions -- a marriage that was one of Fiorina's last moves before her Feb. 9 ouster.

HP, which reported annual sales of $79.9 billion for the year ending Oct. 31, is expected to announce its fiscal third-quarter results on Aug. 16.

- The Associated Press

CRN





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