LAYOFFS AT HP CLOSE TO 15,000

July 19, 2005

The news of the massive restructuring along with thousands of layoffs at Hewlett-Packard Co. came as no surprise Tuesday since reports regarding the decision came out last week.

But the details contained in such major announcements are always buried in the press release issued by the company. Tuesday’s news was no exception.

The headline was that 14,500 positions – about 10 percent of total headcount -- would be eliminated over a six-quarter period.

But the real news deals with where the pain will be felt. Most of the positions to be eliminated will be in support jobs in the areas of finance, HR and IT with the remainder within business units. The company will also eliminate its Customer Solutions Group that handles the SMB market along with public-sector customers. It will combine the sales function into the Personal Systems Group, Imaging and Printing Group and the Technology Solutions Group. Also, CSG executive vice president Michael J. Winkler will retire after CSG is dissolved.

Job eliminations will be minimal in sales positions with little change in R&D.

One person not feeling any discomfort at HP will be chief information officer Randy Mott, formerly CIO at Dell and Wal-Mart, who reportedly received an eight-figure package that includes bonuses and stock options.

And while Mott enjoys his deal, CEO/president Mark Hurd showed that layoffs were only part of the equation. As of next year, the pension and retiree medical program benefits will be frozen for employees who don’t meet the “defined criteria based on age and years of company service,” HP said.

In addition, a report stated that headcount was reduced by 1,600 during the first half of the fiscal year and an additional 1,400 workers will be eliminated through October. HP employed 151,000 workers at the end of October 2004.

The move will result in pretax restructuring charges of about $1.1 billion through the next six quarters, starting in the fourth quarter of fiscal 2005, excluding a prior $100 million restructuring charge to be taken in the third quarter.

Also anticipated is yearly savings of $1.9 billion beginning with fiscal year 2007, including $300 million worth of savings regarding benefits along with $1.6 billion in labor costs. The company expects savings in the range of $900 million to $1.05 billion in fiscal 2006.

And how has Wall Street been reacting lately to developments at HP?

The stock has been trading near its 52-week high of $25.07.

By Glenn J. Kalinoski, Executive Editor, Customer Inter@ction Solutions