Hewlett-Packard to shed 9000 jobs

Hewlett-Packard, the world's largest personal-computer maker, plans to cut about 9000 jobs and retool its computer-services business to help it to compete with IBM.

HP intends to take a US$1 billion ($1.48 billion) charge for paying severance and modernising its data centres to provide more automated services to customers. It also plans to replace about 6000 of the eliminated positions with workers in different countries.

"These sets of actions will enable HP to grow better than the market," Ann Livermore, executive vice-president for enterprise business, said yesterday. "This is a substantial opportunity for us and ... for our clients."

The job cuts come after HP raised its 2010 forecast last month for the third time since November as results beat analysts' estimates on a revival in business spending.

Chief executive Mark Hurd, who has announced more than 48,000 job cuts during his five-year tenure, has expanded into more profitable services as the recession crimped corporate budgets for equipment. He bought Electronic Data Systems for US$13.2 billion in 2008, vaulting HP to No 2 in services behind IBM.

HP said the US$1 billion in expenses for severance costs and asset impairments would be applied between now and fiscal 2013. The moves would result in net annual savings of US$500 million to US$700 million by the end of fiscal 2013.

The company had 304,000 employees at the end of its fiscal year in October. Hurd, 53, has cut jobs before to shift the workforce and expand the sales staff. When he became CEO in 2005, he cut 10 per cent, or more than 15,000 positions, to lift profit. In 2008, he announced a plan to eliminate 24,600 jobs over three years to save US$1.8 billion after the purchase of EDS.

Livermore said yesterday that the cuts and the new hiring would take place over a multi-year period. HP's services unit would be hiring 6000 workers in sales and in some "global delivery centres", she said.

Aaron Rakers, an analyst at Stifel Nicolaus & Co, said, "This company is focusing more and more on revenue growth in their services business."

HP said last month that services revenue rose 2.5 per cent to US$8.71 billion, while PC sales rose 21 per cent and orders for server computers and storage devices jumped 31 per cent.

Services accounted for 28 per cent of HP's overall US$30.8 billion in quarterly revenue.

Hewlett-Packard is not the only hardware maker trying to gain ground on IBM, the world's largest computer-services company. Dell, the No 3 personal-computer maker, bought Perot Systems in November for about US$3.9 billion.

Xerox completed its purchase of Affiliated Computer Services for about US$6 billion in February to accelerate its focus on computer services amid declining sales of printing equipment.

Hewlett-Packard fell US43c to US$45.58 at 4pm in New York Stock Exchange composite trading. The stock has fallen 12 per cent this year.

- BLOOMBERG