Business appliance maker Hewlett-Packard Co. (HP) announced plans to reduce its workforce by 14,500 employees, or about 10 percent, over the next six quarters.
HP says the plan, which also includes restructuring and modifying its retirement funds, is designed to simplify its structure, reduce costs, and place greater focus on its customers. In fiscal 2007, HP expects approximate ongoing annual savings of U.S. $1.9 billion, composed of $1.6 billion in labor costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion.
"After a thorough review of our business, we have formulated a plan that will enable HP to begin delivering its full potential," said Mark Hurd, CEO and president. "We can perform better -- for our customers and partners, our employees, and our shareholders -- and we will."
HP said approximately half the savings will be used to offset market forces or reinvested in the business to strengthen competitiveness, while the remainder is anticipated to flow through to operating profit.
According to the company, the majority of the staff reductions will come from support functions, such as Information Technology, Human Resources, and Finance. The Sales and Research and Development departments will be effected with little change, HP said.
HP said that it will offer a voluntary retirement program to longer-serving staff based in the U.S. and that headcount-reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate.
In addition, HP is modifying its U.S. retirement programs. As of January 2006, the company will freeze the pension and retiree medical-program benefits of current employees who do not meet defined criteria based on age and years of company service. Instead, HP will increase its matching contribution to most employees' 401(k) plans to 6 percent from 4 percent.
HP will also dissolve the Customer Solutions Group (CSG) -- a standalone business group responsible for sales to enterprise, small and medium-size businesses, and public-sector customers. It will merge the sales function and related accountability directly into three individual business units -- Technology Solutions Group (TSG), Imaging and Printing Group (IPG), and Personal Systems Group (PSG).
Following the dissolution of CSG, Michael J. Winkler will retire from his position as executive vice president of CSG, after nearly 10 years at HP and Compaq and more than 35 years in the IT industry. Senior sales positions will be added to each business segment.
In addition, HP has recently named three new executive vice presidents and added them to the company's Executive Council, expanding it to 10 members, following Winkler's retirement.
Cathy Lyons was named executive vice president and chief marketing officer. Todd Bradley, formerly president and CEO of palmOne, was named executive vice president of PSG. Randy Mott, formerly chief information officer at Dell, joined HP as executive vice president and chief information officer.
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