H.P. Will Cut 9,000 Jobs as It Streamlines Its Data Centers

H.P. Will Cut 9,000 Jobs as It Streamlines Its Data Centers
By CLAIRE CAIN MILLER
Copyright by The Associated Press
Published: June 1, 2010
http://www.nytimes.com/2010/06/02/technology/02hewlett.html?th&emc=th


SAN FRANCISCO — Hewlett-Packard announced Tuesday that it would cut 9,000 jobs and take a charge of about $1 billion over several years, as it consolidates and automates data centers.

During the same time period, H.P. will hire 6,000 new workers in sales and service delivery positions, said Jane McMillian, an H.P. spokeswoman.

Under Mark V. Hurd, H.P.’s chief executive, the company has shaved costs by regularly cutting large numbers of staff. In 2005, Mr. Hurd cut 15,300 jobs, in part by consolidating the data centers running the company’s own operations.

In 2008, after H.P. acquired Electronic Data Systems, it cut 7.5 percent of the company, or 25,000 people, and reduced the salaries of others by 20 percent in some cases. In May 2009, H.P. announced that it would cut 6,420 people.

H.P. said it would invest $1 billion in its enterprise services business and that the modernized data centers would enable its customers to run their businesses more efficiently from those data centers. The company has folded its recent acquisition of E.D.S. into its enterprise services division, which runs the business operations for clients.

“When we’re talking about this new era, it’s all really to enhance the client experience and to make them more effective so that they can grow their business,” Ms. McMillian said.

In the most recent quarter, ended April 30, the division recorded revenue of $8.7 billion. Though it has not been growing quickly of late, the company has been devoting resources to expanding the business because the profit margins are much higher than in its core business of making PCs. The division had a 15.9 percent profit margin compared with the PC division’s margin of 4.6 percent.

The company positioned the changes as the natural next step after buying E.D.S., the computer services company. “Over the past 20 months, we focused on integrating E.D.S. and improving profitability,” Tom Iannotti, senior vice president and general manager of the division, said in a statement. “Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business.”

Mark Fabbi, a vice president and analyst at Gartner, compared Hewlett’s data center division to factory floor during the Industrial Revolution. “In the Industrial Revolution, they put things on an assembly line and didn’t need those jobs anymore,” he said. “This is the same thing applied to H-P, a hundred years later.”

The company said it would record about half of the $1 billion charge in the third quarter and the rest by the end of fiscal 2013. The layoffs and $1 billion charge will result in savings of $500 million to $700 million a year, the company said.

In April, H.P. announced that it planned to acquire Palm, the maker of the Pre and Pixi smartphones, for $1.2 billion.