HP to Lay Off Another 25K-30K Workers Ahead of Corporate Split

Latest round of cuts just shy of 10 percent of company's total workforce

Data Center Knowledge

September 16, 2015

3 Min Read
HP to Lay Off Another 25K-30K Workers Ahead of Corporate Split
HP Enterprise CEO Meg Whitman (Photo: HP)



This post originally appeared at The Var Guy

By DH Kass

HP said it will sever another 25,000 to 30,000 jobs, mostly from its enterprise services unit, as part of an overall plan to save some $2.7 billion in costs as the vendor careens to its November 1 planned split into two separate entities.

The vendor divulged the planned cuts along with financial projections for the new HP Enterprise operation, which will formally begin operations in about a month, at a meeting on Tuesday with financial analysts.

HP said its printer and PC business will pare some 3,300 jobs over the next three years.

The layoffs are in addition to the 55,000 HP previously planned and the recent shuttle of enterprise services staffers to IT consultant Ciber. This current round of cuts is just shy of 10 percent of HP’s total workforce, a significant staff reduction by any measure.

HP said it will take a $2.7 billion charge to its earnings for restructuring costs over a three-year period beginning with its FQ4 financial statement for the period ending October 31. The charges include $2 billion in severance payments and some $700 million in cost reductions from lease and property disposals associated with the split.

In HP’s FQ3 2015, sales in the enterprise services unit fell 11 percent to $4.9 billion. HP chairman Meg Whitman, however, trumpeted its performance, saying on an earnings call that ES “significantly improved its sequential revenue trajectory and delivered another quarter of sequential and year-over-year profit improvement."

At the time, HP chief financial officer Cathie Lesjak said some 3,900 employees had exited the company during FQ3 and suggested that by the end of FQ4 another 5 percent could be laid off. That figure, as it turns out, was short of the actual number of job cuts.

“It has been a bumpy road. There’s no question about it,” Whitman told analysts. "These restructuring activities will enable a more competitive, sustainable cost structure for the new Hewlett Packard Enterprise," she said. "We've done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring."

HP said that it expects HP Enterprise will produce more than $50 billion in annual sales. The company projects fiscal 2016 non-GAAP diluted net EPS to be in the range of $1.85 to $1.95, and estimated GAAP diluted net EPS to be in the range of $0.75 to $0.85.

The vendor said that about 37 percent of HP Enterprise’s sales will come from enterprise services, 7 percent from software and about 50 percent from servers, storage, networking and technology services sales.

The vendor also said it expects cloud revenue in fiscal 2015 to be approximately $3 billion and to grow more than 20 percent annually for the next several years.

HP Enterprise will not rely on a few customers to generate the lion’s share of its sales, HP said. Mike Nefkens, HP Enterprise Services head, said that no one account comprises more than 10 percent of HP Enterprise's sales.

The PC and printer focused HP Inc. will concentrate on returning cash to shareholders and expanding into new markets such as 3-D printing, Whitman said.

This first ran at http://thevarguy.com/business-technology-solution-sales/091515/hp-layoff-another-25k-30k-workers-ahead-corporate-split

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