HP to cut 9,000 jobs; see $1B in charges

A sign outside Hewlett Packard headquarters in Palo Alto , Calif. is seen Tuesday, Feb. 16, 2010. Hewlett-Packard Co. (AP Photo/Paul Sakuma)
June 1, 2010 6:24:24 PM PDT
Hewlett Packard has announced it is laying off 9,000 workers around the world. The computer giant has not yet said how many jobs will be affected at its headquarters in Palo Alto.

HP says the whole point of the restructuring plant is to drive growth and profit margins. The 9,000 job cuts would be a direct result opf productivity gains and automation.

Palo Alto-based Hewlett-Packard is gearing up to hack 9,000 jobs globally from its enterprise services division. On one hand, it is terrible news for the employees affected, but analyst Larry Magid says it is good for stockholders because it shows the company is refocusing its business.

HP plans to add back 6,000 positions later to boost its global sales and delivery staff.

"They put a spin on it. This is not a layoff because they're not doing well. It's a retooling of the company and essentially reprioritizing, and they need a different type of workforce and apparently a smaller workforce," Magid said.

"The combinations of these activities will allow HP to reinvest for further growth. Investment will include private cloud infrastructures, application services and desktop services," Executive Vice President of HP Enterprises Ann Livermore said in a webcast.

During this morning's audio webcast to financial analysts and stockholders, HP announced a transformation of its enterprise services business. It is a three-year plan which it will take $1 billion in charges over several years as it creates fully-automated commercial data centers. Once completed, the changes could save up to $700 million a year thanks to "automation."

"Automation has been a threat to the working person for well over 100 years, since the Industrial Revolution. We have lost jobs to automation, but the hope is that we're going to create jobs," Magid said.

Hewlett Packard, the world's largest maker of PCs and printers, is working to expand its business into other areas.

"Personal computing is not a profitable business. HP does very well on printer ink, but you can't build a multibillion dollar, multinational business strictly on printer ink," Magid said.

In this case, HP is investing $1 billion into the next generation of its enterprise services like data centers, management platforms and networks. It is modernizing and automating its IT infrastructure to better serve clients' needs in the commercial technology services market.

HP says it has already signed a number of new contracts with new customers including 50 new deals worth $100 million or more to provide computing and other tech services.

With the morning news, HP's shares rose just slightly during Tuesday trading.

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