HP to lay off about 27,000, profit slides 31 percent

SAN FRANCISCO (Reuters) - Hewlett Packard Co plans to lay off roughly 27,000 employees or about 8 percent of its workforce over the next couple of years to jumpstart growth and save up to $3.5 billion annually, sending its shares 11 percent higher.

The company said the layoffs would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014, when the layoffs are expected to the completed.

The world's No. 1 personal computer maker, which employs more than 300,000 people globally, also said on Wednesday that it had a 31 percent decline in second-quarter profit and a 3 percent decline in revenue, compared with a year ago.

The results, however, were better than Wall Street expectations.

Layoffs "adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company," Chief Executive Meg Whitman said.

"This is broad based," she said in an interview. "By design, it will touch all of HP."

Whitman said a third of the layoffs would be in the United States. The company will take a pretax charge of $1.7 billion in fiscal 2012 related to the layoffs.

Whitman plans to boost spending on research and development, especially in printing and PCs, with the savings from the cost cuts.

Sterne Agee analyst Shaw Wu said the quarter was surprisingly strong for HP, which had missed its own forecast most quarters in the last 18 months and prior to Whitman taking over as CEO.

"Everyone expected a miss, given what Dell said," Wu said. "It looks like HP is regaining its footing."

Dell shares on Wednesday plunged 17 percent following weaker than expected results and a disappointing revenue forecast spurred fears that global tech spending is weakening faster than anticipated.

HP itself has been trying to move past the internal upheaval that marked 2011, including the departure of two chief executives.

Whitman, a veteran Silicon Valley executive who took the top job last September, has been trying to turn the company around.

Whitman said both business leaders and consumers in Europe were worried about the region's economy, which is hurting HP's business. She warned that the European debt crisis was a big "headwind" the company was facing.

HP reported second-quarter net income of $1.59 billion, or 80 cents a share, compared with $2.3 billion, or $1.05 a share, a year ago. Revenue of $30.69 billion was down 3 percent compared with the same period last year.

Excluding after-tax costs for amortization, restructuring charges and acquisition-related charges, HP said it earned 98 cents a share, compared with analysts' average estimate of 91 cents, according to Thomson Reuters I/B/E/S.

TABLET LAUNCH FOR HOLIDAY

Whitman, who has been at the helm for six months, said the company also plans to launch tablets -- for both consumers and corporations -- later this year.

"We will have a Windows 8 tablet for the holiday," she said.

This would be HP's second attempt in the tablet market. HP killed its previous WebOS-based TouchPad tablet last year after just seven weeks on store shelves, citing poor demand.

Whitman also said HP's acquisition of British software company Autonomy for over $11 billion is facing challenges, and results in the division fell short of HP's expectations.

HP has moved the division under its chief strategy officer Bill Veghte. Autonomy founder Mike Lynch will be leaving the company.

Results from HP's other divisions were also weak.

Sales from the personal systems group, encompassing PCs, were flat with a decline in sales to consumers offsetting revenue from commercial clients.

Revenue from its bread-and-better printing group, which is being merged with the PC group, fell 10 percent after weak consumer and corporate demand.

"We improved the channel inventory to within an acceptable range," Whitman said on a conference call, referring to the printing group. "However, we continue to face a weak demand environment."

Sales of enterprise servers, storage and networking equipment fell 6 percent.

HP shares rose to $22.35 after hours after ending down 3.2 percent at $21.08.

(Reporting By Poornima Gupta; Editing by Bernard Orr)

HP's missteps culminate in loss of 27,000 jobs

SAN FRANCISCO (AP) — Hewlett-Packard CEO Meg Whitman has quantified the painful price that must be paid for the missteps of her predecessors as she tries to turn around the Silicon Valley pioneer. The bungling will wipe out 27,000 jobs so HP can save enough money to lift its earnings and invest in the development of more profitable products and service.

The streamlining announced late Wednesday amounts to the largest payroll purge in Hewlett-Packard Co.'s 73-year history. About 8 percent of HP's nearly 350,000 employees are to be gone by October 2014.

The announcement came eight months after HP hired Whitman to turn the company around. The company expects to save $3 billion to $3.5 billion annually from the job cuts and other austerity measures. HP will try to reduce the number of layoffs by offering early retirement packages.

The somber news overshadowed the release of HP's latest quarterly results. Although HP's earnings and revenue declined from a year ago, the numbers were better than analysts had projected. HP delivered another pleasant surprise by offering a forecast that raised hopes that HP may be poised to bounce back.

"While I wouldn't say we have turned the corner, we are making real progress," Whitman told analysts during a conference call.

Investors were pleased, although it wasn't clear whether their glee had more to do with the cost-cutting or the company's performance during its fiscal second quarter, which ended in April.

HP shares surged $1.97, or more than 9 percent, to $23.05 in Wednesday's extended trading following the announcements.

They're still worth just half what they were before HP parted ways with Mark Hurd, a cost-costing specialist who stepped down in 2010 amid a scandal revolving around the nature of his relationship with a former actress who worked as an HP contractor. An investigation uncovered inaccurate expense reports.

The current troubles at HP have been traced both to Hurd and his successor, Leo Apotheker, who didn't respond to the threat posed by a shift to computing on smartphones and tablets.

Whitman's plan calls for less bureaucracy so the company can respond more quickly to customer needs. She also wants to boost research and development to spur innovation.

HP, which is based in Palo Alto, Calif., has been struggling to sell more personal computers and printers; demand has softened as people spend more time surfing the Web on phones and tablets such as Apple Inc.'s iPad. And the company's efforts to sell more business software and consulting services have been stymied by competition from the likes of IBM Corp. and Oracle Corp.

"Work force reductions are never easy," Whitman said Wednesday. "They adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced cost for HP."

Whitman plans to funnel most of the savings from the job cuts into product development, with an emphasis on three areas: software services delivered online, a concept known as "cloud computing"; data storage and analysis; and computer security. Some of the extra cash will go toward boosting HP's earnings, too.

HP's work force has undergone several reorganizations during the past decade. Two of the biggest occurred during Hurd's regime. HP announced 14,500 job cuts in 2005 in one of his first big acts as CEO. A round of 24,600 cuts came in 2008 after HP bought technology consulting service EDS for $13.9 billion.

HP did not say where it would make the latest cuts. It is combining its printer and PC divisions, which could reduce some overhead.

In related moves, Whitman is changing the leadership at HP's recently acquired Autonomy division, which makes software that finds and analyzes data within companies and government agencies.

Bill Veghte, HP's chief strategy officer, is replacing Autonomy founder Mike Lynch in an effort to boost the division's financial performance. The shake-up is likely to amplify investor concern about whether HP blundered last year when it paid $11 billion for Autonomy. Apotheker announced the deal in August, just a month before he was fired.

Whitman told analysts she still believes the Autonomy acquisition was smart.

The company earned $1.6 billion, or 80 cents per share, in February through April. That's 31 percent less than the $2.3 billion, or $1.05 per share, it earned a year earlier.

Excluding one-time items, the company said it earned 98 cents per share. That topped the average estimate of 91 cents per share among analysts surveyed by FactSet.

Revenue fell 3 percent to $30.7 billion, but that was about $800 million above analysts' average projection.

To pay for severance and other restructuring costs, HP expects to take a pre-tax charge of about $1.7 billion in the current fiscal year, which ends in October. About $1 billon of those charges will come in the current quarter, which ends in July. HP expects to record $1.8 billion more in charges through fiscal 2014.

The company also expects to register a charge of $1.2 billion to account for the declining value of the Compaq computer brand. HP bought Compaq a decade ago in a deal that many shareholders, including the son of a company founder William Hewlett, tried to block.

HP to lay off 27,000, profit slides 31 percent

SAN FRANCISCO (Reuters) - Hewlett Packard Co plans to lay off roughly 27,000 employees or about 8 percent of its workforce over the next couple of years to jumpstart growth and save up to $3.5 billion annually, sending its shares 11 percent higher.

The company said the layoffs would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014, when the layoffs are expected to the completed.

The world's No. 1 personal computer maker, which employs more than 300,000 people globally, also said on Wednesday that it had a 31 percent decline in second-quarter profit and a 3 percent decline in revenue, compared with a year ago.

The results, however, were better than Wall Street expectations.

Layoffs "adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company," Chief Executive Meg Whitman said.

"This is broad based," she said in an interview. "By design, it will touch all of HP."

Whitman said a third of the layoffs would be in the United States. The company will take a pretax charge of $1.7 billion in fiscal 2012 related to the layoffs.

Whitman plans to boost spending on research and development, especially in printing and PCs, with the savings from the cost cuts.

Sterne Agee analyst Shaw Wu said the quarter was surprisingly strong for HP, which had missed its own forecast most quarters in the last 18 months and prior to Whitman taking over as CEO.

"Everyone expected a miss, given what Dell said," Wu said. "It looks like HP is regaining its footing."

Dell shares on Wednesday plunged 17 percent following weaker than expected results and a disappointing revenue forecast spurred fears that global tech spending is weakening faster than anticipated.

HP itself has been trying to move past the internal upheaval that marked 2011, including the departure of two chief executives.

Whitman, a veteran Silicon Valley executive who took the top job last September, has been trying to turn the company around.

Whitman said both business leaders and consumers in Europe were worried about the region's economy, which is hurting HP's business. She warned that the European debt crisis was a big "headwind" the company was facing.

HP reported second-quarter net income of $1.59 billion, or 80 cents a share, compared with $2.3 billion, or $1.05 a share, a year ago. Revenue of $30.69 billion was down 3 percent compared with the same period last year.

Excluding after-tax costs for amortization, restructuring charges and acquisition-related charges, HP said it earned 98 cents a share, compared with analysts' average estimate of 91 cents, according to Thomson Reuters I/B/E/S.

TABLET LAUNCH FOR HOLIDAY

Whitman, who has been at the helm for six months, said the company also plans to launch tablets -- for both consumers and corporations -- later this year.

"We will have a Windows 8 tablet for the holiday," she said.

This would be HP's second attempt in the tablet market. HP killed its previous WebOS-based TouchPad tablet last year after just seven weeks on store shelves, citing poor demand.

Whitman also said HP's acquisition of British software company Autonomy for over $11 billion is facing challenges, and results in the division fell short of HP's expectations.

HP has moved the division under its chief strategy officer Bill Veghte. Autonomy founder Mike Lynch will be leaving the company.

Results from HP's other divisions were also weak.

Sales from the personal systems group, encompassing PCs, were flat with a decline in sales to consumers offsetting revenue from commercial clients.

Revenue from its bread-and-better printing group, which is being merged with the PC group, fell 10 percent after weak consumer and corporate demand.

"We improved the channel inventory to within an acceptable range," Whitman said on a conference call, referring to the printing group. "However, we continue to face a weak demand environment."

Sales of enterprise servers, storage and networking equipment fell 6 percent.

HP shares rose to $22.35 after hours after ending down 3.2 percent at $21.08.

(Reporting By Poornima Gupta; Editing by Bernard Orr)