A mixed bag of news for HP today: it has posted Q2 sales that have just edged out analyst expectations, but it has also confirmed 27,000 job cuts that should save the company between $3 billion and $3.5 billion by 2014.
The company is a tech behemoth: it employs 350,000 people worldwide, before these cuts were announced. This means the cuts are equivalent to about 8 percent of its workforce.
The cuts fall squarely in the middle of the estimates that were reported in past weeks, with CEO Meg Whitman reportedly planning to cut between 25,000 and 30,000 jobs — news that investors seemed to actually find encouraging with the stock price rising on the news. That seems to be the case here, too: the combination of okay results plus a concerted plan for cutting costs has sent the stock up in after-hours trading.
HP says that it will be offering voluntary retirement to employees, so the exact number of actual layoffs has yet to be determined. The money that it saves will be re-invested across the whole of the company. It also plans to take a pre-tax charge of $1.7 billion in FY 2012 as a result, with additional pre-tax charges
As a result of this restructuring, HP expects to record a pre-tax charge of approximately $1.7 billion in fiscal 2012 that will be included in its GAAP financial results for that period. Through fiscal 2014, HP expects to record additional pre-tax charges approximating $1.8 billion that will be included in its GAAP financial results for the relevant periods.
As for earnings, these were down by thee percent to $30.7 billion — but still beat average analyst expectations of $29.92 billion. Earnings per share were also down 21 percent to $0.98, with analysts expecting EPA of $0.91. As a point of comparison in demonstrating the drop in HP’s fortunes, EPS for the same quarter last year was $5.24.
Before today, the company had been slowly changing the course of its ship. In March, the company announced an “organizational realignment” in which it started to consolidate some of its hardware assets. Its Imaging and Printing Group were merged with its Personal Systems Group to create a new Printing and Personal Systems Group that is now led by Todd Bradley, who had been heading up the PSG since 2005.
Last week HP said that it would be giving shareholders a dividend of 13.2 cents per share. This will be the third divided that HP has paid out in FY2012. The company has 2 billion shares of common stock outstanding.
As AllThingsD pointed out earlier today, one big focus for the company is in its regional operations — specifically Europe. Some 37 percent of its revenues come from that part of the world — around $11 billion for this last quarter — and given the economic problems in Europe at the moment this means HP is the most exposed of the tech companies in the region. (We have more detail on one of HP’s European-focused operations, Autonomy, here.)
Shares in the company were down nearly 5 percent before the release was announced.
Full layoffs release below.
PALO ALTO, CA–(Marketwire – May 23, 2012) – HP (NYSE: HPQ) today outlined plans for a multi-year productivity initiative designed to simplify business processes, advance innovation and deliver better results for customers, employees and shareholders.
The restructuring is expected to generate annualized savings in the range of $3.0 to $3.5 billion exiting fiscal year 2014, of which the majority will be reinvested back into the company. Enabling investments in people, processes and technology will allow HP to accomplish the restructuring effort and to generate the savings. These moves are expected to yield significant improvements in efficiency and customer service during the next several years. HP expects to use the savings to boost investment in innovation around its three areas of strategic focus: cloud, big data and security, as well as in other segments that offer attractive growth potential.
As part of the restructuring, HP expects approximately 27,000 employees to exit the company, or 8.0% of its workforce as of Oct. 31, 2011, by the end of fiscal year 2014. The company is offering an early retirement program, so the total number of employees affected will be impacted by the number of employees that participate in the early retirement plan. Workforce reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate.
In addition to these restructuring actions, HP expects to achieve additional savings from non-headcount cost reductions, including supply chain optimization, SKU and platform rationalization, go-to-market strategy simplification and business process improvement.
“These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business,” said Meg Whitman, HP president and chief executive officer. “While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders.”
HP expects to reinvest savings in each of its business segments to strengthen their ability to stay ahead of customer expectations and capitalize on growing market trends.
As a result of this restructuring, HP expects to record a pre-tax charge of approximately $1.7 billion in fiscal 2012 that will be included in its GAAP financial results for that period. Through fiscal 2014, HP expects to record additional pre-tax charges approximating $1.8 billion that will be included in its GAAP financial results for the appropriate periods.