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Analysts expect massive HP layoffs

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Hewlett-Packard is likely to lay off thousands more employees, financial analysts have projected after new chief executive Mark Hurd presented his inaugural assessment of quarterly earnings.

Hurd didn't reveal specific layoff plans after the earnings report, but he did make clear HP's intent to cut expenses and said his company has "a cost structure that is off benchmark in many areas." Now the analysts are weighing in with their assessments of the printer and computer maker's future.

"We expect that Hurd will likely articulate his detailed plan for improving HP sometime over the next two months, and we do expect material workforce reductions--likely numbering five percent to 10 percent of the workforce, or 7,500 to 15,000 people," Sanford C. Bernstein analyst Toni Sacconaghi said in a report. He estimated that doing so could increase annual earnings by US20 cents to US40 cents per share.

Merrill Lynch analyst Steve Milunovich predicted job cuts would be announced by August; he projected an earnings boost of 21 cents to 42 cents per share for a hypothetical reduction of five percent to 10 percent of employees.

HP declined to comment Friday on possible layoff plans.

Massive job cuts have been more the rule than the exception in recent years at the Palo Alto, California-based company. HP laid off thousands of employees under the plan by previous chief executive officer Carly Fiorina to merge with Compaq Computer in an attempt to compete better against top rivals IBM and Dell.

Competitors have taken a similar approach. IBM announced a cut of 10,000 to 13,000 employees in its services division, and Sun Microsystems has laid off thousands in recent years.

HP is in the middle of more job cuts in divisions for imaging and printing, servers and storage, and services. Not all cuts have been in the form of pink slips, though: 1,900 employees took advantage of a voluntary severance plan in the imaging and printing division.

In the last quarter, which ended April 30, HP took a charge of US$71 million for the imaging and printing cuts. It also took a US$74 million charge for cuts in services and US$24 million for cuts in the servers and storage group.

In the current quarter, HP is budgeting US$100 million for job cuts that already were planned.

Source.

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