HP will chop up to 16,000 more jobs

Hewlett-Packard (HP) will cut between 11,000 and 16,000 more jobs as part of changes to its ongoing restructure.

In 2012, HP adopted a restructuring plan that it hoped would lower costs. The company previously estimated that the plan would see 34,000 jobs cut.

But on last week’s conference call about the company’s fiscal 2014 second quarter, HP CEO Meg Whitman revealed the company plans to increase that number by between 11,000 and 16,000 - meaning between 45,000 and 50,000 jobs would go in total as part of the restructure.

Whitman said that “HP’s turnaround remains on track” but that “we have more work to do to improve the consistency of our execution and lower our cost structure to drive overall profitability”.

“No company likes to reduce their workforce, but the reality is that HP must be maniacally focused on continuous improvement in our cost structure,” Whitman said.

The company’s CFO, Cathie Lesjak, outlined the timing of the cuts.

“We expect a total of approximately 41,000 people to leave by the end of fiscal 2014, with the remainder in 2015,” Lesjak said.

“We expect this to create additional run-rate savings in FY16 of approximately [US]$1 billion per year, on top of what we previously laid out, although we expect some of this will be reinvested back into the business,” the CFO said.

Much of the questioning from analysts to HP management during the call pertained to the cuts.

Keith Bachman, an analyst at BMO Capital Markets, asked if the additional job cuts indicated disappointment in some areas.

Whitman replied: “I am actually not disappointed at all with how we’re doing. We just see more opportunities to lower our cost structure, streamline our operations, without impairing our effectiveness - in fact, making us a more nimble and decisive company.”

“I think it’s the natural course of what makes sense in a turnaround of this size and scale.”

Toni Sacconaghi, from Sanford C Bernstein & Company, questioned the repeated revisions of the number of jobs being cut in the restructure.

“My understanding originally was 27,000 was what was needed to right-size the company. Then it went to 29,000, then it went to 34,000. Now it's going to 50,000,” Sacconaghi said.

“Is that a message that you are not as confident that you can grow EPS [earnings per share] in 2015 without these workforce rebalancings? Is the reason for this incremental workforce rebalancing because you have lost confidence, or you don’t have as much confidence in the company’s ability to grow top line in 2015?”

Whitman answered: “This actually has nothing to do with our confidence in the business. This has to do with really now understanding the opportunities that we have to make this company better.”

Amit Daryanani, analyst at RBC Capital Markets, asked, “How does this play out for the morale of the company, given the headcount cuts seem to almost accelerate a little bit every six months?”

Whitman replied: “No company likes to decrease the workforce. We recognise that is difficult for employees. What I will tell you is I think our employees live it every single day. The environment that we are in, our employees know that there’s ways we can be more efficient. They are in some ways the biggest source of ideas on what we can do differently.

“I think everyone understands the turnaround we’re in. Everyone understands the market realities. Everyone understands the need to create financial capacity to invest in innovation, which will be our point of difference, and making sure that we have the right sales force coverage in every geography.

“I don’t think anyone likes this; but I think actually we’ve done a good job of explaining where we are in the turnaround, what the strategy is and what’s going to be required to get HP to where we all want it to be in the industry,” she said.

When asked if the expected job cuts would increase yet again, Whitman said, “I don't anticipate an additional program.”

Graphic: Scott Maxwell/Flickr