Hewlett Packard, the world’s largest consumer IT company, today unveiled a program that it says is designed to simplify its structure, reduce costs and place greater focus on its customers. The company expects these actions to save $1.9 billion annually.
“After a thorough review of our business, we have formulated a plan that will enable HP to begin delivering its full potential,” said Mark Hurd, HP chief executive officer and president. “We can perform better – for our customers and partners, our employees and our shareholders – and we will.”
To improve costs, the company plans to reduce its workforce over the next six quarters by 14,500 employees, or about 10 percent of its regular full-time staff, and modify its US retirement benefits programs. HP said that the majority of staff reductions will come in support functions, such as information technology, human resources and finance.
Beginning in fiscal 2007, HP expects approximate ongoing annual savings of $1.9 billion, composed of $1.6 billion in labour costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion. HP says approximately half the savings will be used to offset market forces or reinvested in the business to strengthen it’s competitiveness. The remainder is anticipated to flow through to operating profit.
HP expects to record pretax restructuring charges of approximately $1.1 billion over the next six quarters, beginning in the fourth quarter of fiscal 2005. This excludes a previously announced $100 million restructuring charge to be taken in the third quarter.