Hewlett-Packard To Cut 14,500 Jobs

Personal-computer maker Hewlett-Packard Co. on Tuesday said it will cut 14,500 jobs, about 10 percent of its full-time staff, as part of a restructuring plan designed to save $1.9 billion annually and boost business performance.

The job cuts will occur over the next six quarters, the Palo Alto-based company said.

Most of the job cuts will come in support functions — such as information technology, human resources and finance — and the rest will be made inside business units.

The company said job cuts in sales positions will be minimal, and there will be little change to the headcount in research and development.

HP said it will offer a voluntary retirement program to longer-serving employees based in the United States.

The company also said that as of January 2006, it 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 plans to boost its matching contribution to most employees' 401(k) plans to 6 percent from 4 percent.

The company said these changes won't affect benefits currently received by retirees or eligible employees who are longer-serving and close to retirement age. Existing employees will retain benefits they have already earned.

Beginning in fiscal 2007, HP expects to save about $1.9 billion a year, 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 from the restructuring.

The company said about half the savings will be used to "offset market forces" or be reinvested in the business to strengthen HP's competitiveness. The remainder is anticipated to add to operating profit.

It's been a rocky 2005 for HP.

Earlier this year, the company was hit with a $300 million class-action lawsuit filed by workers who claimed they were improperly denied benefits because they were wrongly classified as contractors and not as employees.

The 33 named complainants claim that under a questionnaire used to determine employee status by the courts and the Internal Revenue Service, they qualify as employees instead of as contractors.

A month earlier, Carly Fiorina's nearly six-year reign at Hewlett-Packard Co. ended as the company's board forced her out as chief executive, disappointed by her efforts to make the technology giant whose strongest business is printers more nimble and innovative.
Directors said they fired Fiorina, one of corporate America's highest ranking female executives, because she failed to execute a planned strategy of slashing costs and boosting revenue as quickly as directors had hoped.

"She made a lot of changes, including the merger with Compaq, layoffs, and reorganizations. A lot of employees resented her leadership," said CBSNews.com Technology Analyst Larry Magid.

Fiorina had championed the 2002 acquisition of Compaq Computer Corp. in 2002 despite fierce resistance from shareholders and directors.

"Hewlett-Packard has recently been losing market-share in the PC business, which put her leadership into question," said Magid.

HP plans to record pretax restructuring charges of about $1.1 billion over the next six quarters, beginning in the fourth quarter of fiscal 2005. This excludes a previously announced $100 million restructuring charge to be taken in the third quarter.

HP also plans to dissolve its Customer Solutions Group, which is responsible for sales to small and medium-size businesses and public-sector customers. It will merge the sales function directly into three individual business units — Technology Solutions Group, Imaging and Printing Group and Personal Systems Group.

Following the dissolution of CSG, Michael J. Winkler, 60, will retire as executive vice president of CSG, after nearly 10 years at HP and Compaq.