IT giant Hewlett-Packard (HP) is to cut between 25,000 and 30,000 jobs in the latest round of restructuring designed to improve its lackluster profitability.
The planned redundancies are in addition to the 55,000 layoffs HP Inc. (NYSE: HPQ) announced in 2012 and aimed at helping deliver cost savings of $2.7 billion annually.
However, the company said it would incur a one-off charge of $2.7 billion as a result of the latest staff reductions.
HP's operating margin shriveled from 9.1% in the 2010 financial year to just 6.4% in 2014, with revenues falling by 11.6% over the same period, to $111.4 billion, and the company is hoping a dramatic restructuring will stop the rot.
It has been at work on splitting its organization into two separate companies, with Hewlett Packard Enterprise focusing on software, services and New IP opportunities while HP Inc continues to look after the printer and PC business. (See HP Sees Networking Revenue Up Ahead of Split.)
The just-announced job cuts will all come within Hewlett Packard Enterprise and mainly affect employees involved in enterprise services, with the software and enterprise groups representing the other two business segments in this company.
"Hewlett Packard Enterprise will be smaller and more focused than HP is today, and we will have a broad and deep portfolio of businesses that will help enterprises transition to the new style of business," said Meg Whitman, HP's CEO, in a company statement. "As a separate company, we are better positioned than ever to meet the evolving needs of our customers around the world."
The latest redundancy plans will see HP shed up to a tenth of its workforce based on staff numbers in October 2014, when the company claimed to employ 302,000 members of staff worldwide.
Those numbers have already fallen markedly since 2011, when HP had as many as 350,000 employees on its books.
Details of the new restructuring plans emerged as HP provided an update on its strategy and unveiled its earnings expectations for the 2016 financial year.
The company is guiding for an increase in both sales and operating profits at Hewlett Packard Enterprise -- which generates annual revenues of about $50 billion -- thanks to growth in the market for servers, storage and networking and what it called "stabilization" in the software and services area.
Providing more color on the earnings outlook, HP said that enterprise services -- which is expected to account for 37% of Hewlett Packard Enterprise's overall sales -- would see a 2% fall in revenues in 2016 and record an operating margin of 6-7%.
It believes it can boost that margin to between 7% and 9% by its 2018 financial year through "cost management and operational improvements."
HP's enterprise services division reported a 6.9% drop in revenues in 2014, to $22.4 billion, and an operating margin of just 3.6%.
Executives expect software to account for 7% of Hewlett Packard Enterprise revenues in 2016 and the enterprise group to make up about half of the total.
Whitman, who is to head up the Hewlett Packard Enterprise business, is determined to make the company a major player in the cloud services market.
Introduced in May last year, HPE Helion is an open source software product designed to help customers operate in a so-called "hybrid environment" -- involving a mixture of on-premise, private cloud and public cloud technologies. (See HP Launches NFV-in-a-Box and Telefónica Taps HP for Unica NFV.)
Although other traditional IT players have struggled to make the transition to the cloud, she has set Hewlett Packard Enterprise a target of growing sales by 20% annually "over the next several years."
Revenues in this area are expected to amount to approximately $3 billion in the 2015 fiscal year, representing only about 6% of the company total.
— Iain Morris, , News Editor, Light Reading