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6,400 more jobs cut at cautious HP

Paul Kunert

Hewlett-Packard plans to cut the workforce in its product divisions by a further 2% to seek out more cost savings in a global economy that it says has not yet recovered, despite promising pockets of growth is certain areas.

The US goliath last night posted second fiscal quarter revenues for the period ended 30 April down 3% year-on-year to $27.4bn (£17.6bn), while profits dropped 17% to $1.7bn (£1.09bn).

Half of the 25,000 staff HP earmarked for redundancy in September following the EDS acquisition have left but it has also identified expense reductions from consolidating real estate as the integration of the services provider continues.

"In addition we'll be taking some targeted action to structurally change and improve the effectiveness of our product business that will result in the elimination of approximately 2% of the HP workforce" said HP CFO Cathy Lesjak.

This will result in around 6,400 staff losing their jobs, which along with the changes in real estate is expected to save HP $500m in annual costs by the start of 2012, on top of the $2.5bn already targeted last year.

Despite the continued focus on op-ex, HP CEO Mark Hurd described its Q2 performance as "solid in a challenging environment" with $8.5bn revenues in its Services division, growth of 99%, the major highlight.

"The services business doubled profit to $1.2bn and is now our largest segment," he said, "the integration of EDS is going well and we had a number of large signings this quarter and the pipeline has grown double digits since the acquisition."

This was due in part to HP's wider sales force promoting services to customers he added.

It was however a less cheerful picture in the product categories which saw declines in every business unit; ESS dived 28% to $3.5bn, Software fell 15% to $880m, PSG dropped 19% to $8.2bn, while IPG went down 23% to $5.9bn.

Split down further, the value of sales in industry standard servers and business critical systems both fell 29% as storage slumped 22%, while notebooks and desktop revenues dipped 13% and 24% respectively.

For the next quarter, HP has forecast revenues to remain flat or fall 2%, and while there were pockets of growth in China and the US consumer market during Q2, Hurd said "In terms of the rest of the world, I am not ready to call it better."

The market appeared a little more predictable he agreed but added, "We want to see a couple of quarters more data before we feel good that there is any material improvements."

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