US information technology giant Hewlett-Packard announced a major reorganisation Tuesday that would slash its workforce by 10 percent, or 14,500 employees, by the end of next year. The move comes on the heels of a similar move by technology rival IBM, which now estimates its job reductions will total 14,500, up from an earlier estimate of 13,000 when it announced its overhaul.
The HP job cut is part of a program "designed to simplify its structure, reduce costs and place greater focus on its customers," and save some 1.9 billion dollars annually, the Palo Alto, California, company said in a statement.
"After a thorough review of our business, we have formulated a plan that will enable HP to begin delivering its full potential," Mark Hurd, HP's chief executive officer and president, said in a statement.
Speculation had run high that a major restructuring had been in the works since Hurd took over at HP. Hurd, the former CEO of NCR Corporation, who took the helm of HP from predecessor Carly Fiorina in March, built a reputation for restoring NCR through cost-cutting.
"The work starts today," Hurd said on a conference call with reporters. "We can perform better, for our customers and partners, our employees and our shareholders, and we will."
Hewlett-Packard is one of the world's information technology behemoths, with revenue totalling 83.3 billion dollars for the four fiscal quarters ended April 30.
The plan also aims to restructure HP's US retirement programs, "which will free funds for reinvestment in the business," the company said.
As of January 2006, the company will freeze the pension and retiree medical-program benefits of some employees who do not meet criteria based on age and years of company service. To offset this, HP will increase its matching contribution to most employees' retirement savings plans.
The program also aims to cut the levels of management.
"It improves individual accountability and executive focus through a simpler reporting structure with fewer management layers," HP said.
About half the savings of the program will be used to offset market forces or will be reinvested "to strengthen HP's competitiveness," with the remainder flowing to operating profits.
HP expects to take charges of some 1.1 billion dollars over the next six quarters, to cover the reorganisation costs, in addition to a previously announced 100 million dollar restructuring charge to be taken in the third quarter.
The majority of job cuts will come in support functions, such as information technology, human resources and finance.
The company did not provide a geographic breakdown of the jobs reductions, but said a voluntary retirement program would be offered to long-serving staff based in the United States.
"Headcount-reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate," the company said.
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