14,500 jobs to be slashed at Hewlett-Packard

The job destruction was not unexpected. Severe cuts had been anticipated since Mark Hurd, former chief executive at NCR, took over the job at HP four months ago. As many as 25,000 jobs cuts had been predicted, and the actual number and length of time over which they will be spread—six quarters—disappointed some on Wall Street. HP shares fell in the immediate aftermath of the company’s announcement.

HP’s action follows similar moves at IBM, which increased its planned job cuts to 14,500 from 13,000, and Oracle, which will slash 5,000 jobs after purchasing PeopleSoft. The cuts at Hewlett-Packard are the largest there since thousands of jobs were eliminated following the company’s purchase of Compaq Computer in May 2002. In May of this year, 2,000 workers in HP’s imaging and printing unit accepted voluntary severance packages.

Hewlett-Packard faces cutthroat competition in both the printer and computer markets. The firm lost its position as the number-one seller of personal computers (PCs) to Dell last year. The research firm IDC reported Monday that Dell increased its global lead in the personal computer market in the second quarter, with worldwide growth of 23.7 percent, compared to HP’s 16.3 percent. Dell generated $891,000 per worker last year, compared to $529,000 at HP.

Director of research at Pacific American Securities, Michael Cohen, quoted by Bloomberg News, noted, “It’s obvious to everyone that their cost structure is out of kilter, especially in relation to Dell.” HP also faces IBM in consulting services, and its profitable printer and ink business (it is the world’s largest maker of printers) has come under increasing pressure.

Associated Press writes, “HP’s PC division has long been rumored as a spin-off candidate, especially after the $19 billion acquisition of Compaq Computer Corp. failed to pay off as [former chief executive Carly] Fiorina had promised before her ouster.

“ ‘HP has been a fairly messed up company over the last few years,’ said Mark Stahlman, an analyst at Caris & Co. ‘The history of the company got scrambled. A lot of projects got thrown together. Then it only got worse at the end when services and enterprise were coupled and PCs got thrown into printing.’ ”

Most of the job slashing will take place in HP’s support functions—information technology, human resources and finance—and the remainder will come from its business units. By 2007, the cuts are expected to save the company $1.9 billion a year. No announcement was made as to where the cuts will be carried out. The company does business in 178 countries.

Outplacement firm Challenger Gray & Christmas announced recently that planned job cuts in the US rose to 110,996 in June, the highest total in 17 months. Corporate announcements of job reductions increased 35 percent from May and were up 73 percent from June 2004. So far in 2005, reported layoffs are up 14 percent over a year ago.

In June, layoffs were at an all-time high in the retail and automotive industries. Last month alone, 45,378 jobs were cut in the auto industry and 24,065 in retail. Challenger reported that 99,257 technology-related job cuts have been announced this year, a 56 percent increase over the same period in 2004.

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