Hewlett Packard Co, which is splitting into two listed companies later this year, said on Tuesday it expects to cut another 27,000 to 32,000 jobs in its enterprise business as the tech pioneer adjusts to falling demand and the latest cuts, on top of layoffs of 57,000 workers previously announced under Chief Executive Officer Meg Whitman, and notably will be in the company’s faster growing corporate hardware and services operations, to be spun off as Hewlett Packard Enterprise, or HPE, on 1 Nov.
The latest job cuts indicate a reduction of the company’s total workforce by at least 10 percent, based on the company’s most recent number of more than 300,000 employees as of Oct. 31, 2014, and reflecting the previously announced reduction of 55,000.
The company indicated the cuts will be global, but provided no specifics and under the split into two companies, the other company, HP Inc, will comprise the computer and printer businesses, which have been hit hard by a relentless decline in sales of personal computers.
“We have done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring,” Whitman said in a statement and the job cuts, aimed at saving $2.7 billion a year, will result in a charge of about $2.7 billion, beginning in the fourth quarter, HP said.
Job cuts have become a way of life at the company in recent years as it has digested a series of acquisitions that failed to revive its fortunes and “The number is sadly larger than some people might have expected, but I think it’s a reflection of how much trouble HP has been having with its services,” said Charles King, president and principal analyst of Pund-IT, a Silicon Valley IT consulting firm.
In its fiscal third quarter ended July 31, HP’s revenue from personal computer and printer businesses, and its largest, fell 11.5 percent of the units to be housed in HPE, which will be run by Whitman, sales in enterprise services dropped 11 percent, while revenue at the enterprise group rose 2 percent and HPE will have revenue of more than $50 billion and is expected to report adjusted profit of $1.85 to $1.95 per share in 2016, HP said on Tuesday.
The business is expected to report free cash flow of $2.0 billion to $2.2 billion in 2016, at least half of which is expected to be returned through dividends and share buybacks and HP shares fell 1.4 percent to $26.73 in extended trading and maxim group analyst Nehal Chokshi blamed the market reaction on the cash flow target, which he said looked short of the contribution needed from the enterprise unit to meet analysts’ forecasts.