What’s Forcing HP Into Massive Layoffs?

Hewlett-Packard (NYSE:HPQ) will start its restructuring plans with massive job cuts over a relatively long period of time, with at least 8 percent of the company’s workforce being potentially laid off. HP has been trying to reduce costs and develop strategies to counter slowing demand of its products and services.

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According to Bloomberg, chief executive Meg Whitman’s plans include eliminating 25,000 jobs, while AllThingsD said cuts could rise to the tune of 30,000. Several thousand employees may be given early-retirement packages. Over 10,000 cuts are expected to come from the company’s enterprise services group, which has seen profits decline over the last few years as HP struggles to adapt to the shift toward cloud computing. HP competes with IBM (NYSE:IBM), Oracle (NASDAQ:ORCL), and Cisco Systems (NASDAQ:CSCO) in the business of providing large corporations with hardware, software, and services.

Whitman has also spoken of combining the PC and printing divisions of the company and investing in research and development instead. PC sales have been dropping for the company as the use of tablets like Apple’s (NASDAQ:AAPL) iPad grows.

According to ISI analyst Brian Marshall, cutting about 18,000 jobs would save HP close to $1.2 billion and increase year-end earnings per share by about 50 cents. “If HP institutes a reduction in force as we expect, we wouldn’t be surprised if calendar year 2013 EPS estimates eventually approach $5.00 as the business stabilizes, growth returns in the Jan 2013 quarter and the organization is streamlined,” Marshall wrote in a note to investors.

HP is scheduled to report second-quarter earnings next week. Earlier in the year, it had made sales forecasts for the current quarter that were short of analysts’ predictions.

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