Shape-shifting HP is to throw thousands more workers on the employment bonfire to free up cash for R&D and sales investments, the company confirmed as it provided more background on the pending corporate dissection.
The Palo Alto titan yesterday went public over plans to divide the business in two, with the PC and printer business to be housed by HP Inc and Hewlett-Packard Enterprise to sell servers, storage, networking, software and tech services.
CFO Cathie Lesjak said that during this planning phase HP had found new areas where it can cut costs, and will axe another 5,000 workers.
“While we had not planned to extend our programme beyond fiscal ’14 it has become clear that there are material incremental opportunities that enable savings and investments,” she said on a call with financial analysts last night.
When the redundancy programme began in 2012, HP planned to slash the workforce by 27,000 heads, less than half the number of people that will have left when the process is concluded in the next financial year - 55,000.
Lesjak confirmed 36,000 staff had been axed by the end of fiscal Q3 in August, and said the additional redundancies are not linked to the separation of the PC and printer division.
CEO Meg Whitman said now was the right time to divide the business in two, claiming the One HP strategy was the correct approach when she took over the organisation in 2011, and decided against selling the PC business.
“Three years ago this company was in a fairly difficult situation and we needed to rebuild as One HP,” she said on the call.
Whitman said the balance sheet was stronger, the financials had “improved”, and its go-to-market model was “strengthened” and the management team was well ensconsed.
“But of course the marketplace never stands still and in our industry today more than ever, you have to compete harder and faster every single day, being nimble is the only path to winning,” she said.
She said the separation of the two companies will “accelerate the performance of both more rapidly than we could as currently configured”.
The Enterprise operation has a “robust balance sheet” to support “organic” investments in key area of the portfolio “combined with targeted M&A and partnerships”, HP added.
The PC and Printer organisation will use its “strong cash flow” to pursue organic growth across the portfolio, “while maintaining consistent return of capital to shareholders”, said the company.
After multiple quarters of stalling top line growth, HP fired up the engines in Q3 with the PC business fuelling the gains.
HP said it expects company revenues to be flat is fiscal ’15 but predicted “pockets of growth” in storage, networking and cloud. Enterprise Services, which is locked into cost-cutting mode in Europe, is expected to decline three to five per cent due to "key account run-off” and “softer than expected signings” during this financial year.
But “sharp focus on cost management, continued operational improvements and higher margin new business wins forecasted” are estimated to lead to a small bounce in operating margins. ®