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HP cutting work force by about 10 pct

By Duncan Martell1 hour, 52 minutes ago

Hewlett-Packard Co. (NYSE:HPQ - news) on Tuesday said it will slash 14,500 jobs, or about 10 percent of its work force, in a sweeping move by new Chief Executive Mark Hurd to cut costs by $1.9 billion a year and compete better in cutthroat computer and printer markets.
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The cuts are the biggest since former CEO Carly Fiorina slashed roughly 15,000 jobs after HP's $19 billion acquisition of rival Compaq Computer in May 2002.

Hurd in an interview also said HP could write down the value of the Compaq acquisition if it were merited, a move that would not affect operating results but could be seen as an admission that the deal had not succeeded as hoped.

"We would do that if the accounting led us to that," he said, declining to say whether HP would take such action.

HP shares, which have risen recently in anticipation of the job cuts, were down 1.4 percent on Tuesday.

HP, which employs 151,000 workers across the globe, said the majority of the job cuts would come in support functions, such as information technology, human resources and finance. The remainder will come in its business units, which include the PC, printer, server and software businesses.

The Palo Alto, California, company said it would carry out the restructuring over the next year and a half, during which time it expects to record pretax charges of about $1.1 billion.

Hurd has said HP needs to get its costs more in line with those of other technology companies such as Dell Inc. (NasdaqELL - news), the No. 1 PC maker and one of HP's chief rivals.

"They've gotten themselves in fighting shape here," Caris & Co. analyst Mark Stahlman said of the job cuts, adding that the announcement dispels uncertainty, which had been frustrating for some in HP's engineering culture. "I think this is going to give a big boost to morale internally," he said.

HP shares were down 34 cents at $24.58 in afternoon trading. Since Hurd's first day on the job at HP, April 1, the stock is up 18 percent, and it has rallied in the weeks leading up to today's announcement. In the same period, Dell shares are up 9.5 percent.

Analysts have pressed HP for further job cuts or to spin off its lucrative imaging and printing group or divest its personal computing business, where costs are still higher than Dell's. But Hurd, in recent management announcements, has separated the printing and PC units, which were combined under Fiorina, suggesting that so far, he has chosen to keep working on the PC business.

Some investors said they had been expecting more. "I was expecting to hear a lot more changes in how they structure the business," said Shawn Campbell, principal of Campbell Asset Management. "If this is it, I'm a little underwhelmed."
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Hurd in the interview said he was not working on "spinning off any business" and that HP's focus "has been to make HP in the short term the best it can be."

Hurd is no stranger to cost cuts. As CEO of NCR Corp. (NYSE:NCR - news), which makes retail check-out registers and bank machines, he also cut jobs and changed pension programs.

"He's come to some decisions very quickly" said Tim Ghriskey, chief investment officer of Solaris Asset Management, which has $800 million in assets under management. "Ten percent of the employees is a major cut, but he's shown himself historically to make tough decisions to restructure companies. He's made a tough decision here."

The restructuring includes changes to workers' benefit plans and the elimination of the Customer Solutions Group, a separate business group responsible for sales to business and public-sector customers.

Beginning in fiscal 2007, HP expects continuing annual savings of about $1.9 billion, composed 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.

The company said the savings will be reinvested in the business to boost competitiveness, with some also expected to flow through to operating profit. The cuts inside business units were planned for areas where work can be reduced through streamlining and prioritization.

The company has already trimmed jobs in its lucrative imaging and printing business. In May about 2,000 workers in that unit accepted voluntary severance packages.

HP's fiscal third quarter concludes at the end of July.

(Additional reporting by Nicole Volpe in New York)

Venolus

I though i could post a resume in HP...will have to rethink now

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