SAN FRANCISCO — Hewlett-Packard Co. said Wednesday that it will cut its global work force by 27,000 employees by October 2014, while reporting a drop in sales and profit for its second quarter.
The technology giant said it needed to reduce expenses to reinvigorate its struggling business, as it has no strong entries among the tablet computers and smart phones that have captivated consumers.
The cuts announced Wednesday represent HP’s largest payroll purge in its 73-year history. The reductions will affect about 8 percent of HP’s nearly 350,000 employees by the time the overhaul is completed in October 2014.
HP hopes to avoid as many layoffs as possible by offering early-retirement packages. There was no indication of how many of the eliminated jobs would be in the United States.
The company, based in Palo Alto, expects to save as much as $3.5 billion annually from the job cuts and other economizing.
HP employs about 1,400 people in a Conway customer-support center, according to the Conway Development Corp. website. An HP spokesman declined to say how many Conway employees would be affected by the cutback.
“We do expect the work force reduction to impact just about every business and region,” the spokesman said in an e-mail.
Most of the job cuts are expected to take place in the company’s enterprise services, which manage data centers and provide technological consulting.
Arkansas had pledged to give Hewlett-Packard more than $35 million in incentives, with an additional $8 million in local incentives, to place the operation in Conway in 2009.
HP Chief Executive Officer Meg Whitman plans to put most of the savings into developing more products and services that could help the company adapt to technological shifts. Those changes are driving demand for more mobile computing and for software that is provided over high-speed Internet connections, rather than installed on individual computers.
Investors reacted positively to the shake-up, sending HP’s shares up 1.2 percent in extended trading Wednesday after the announcement, which was made after the regular markets closed.
“Work-force reductions are never easy,” Whitman said in a conference call Wednesday with analysts. “They adversely impact people’s lives, but in this case, they are absolutely critical to the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced cost for HP.”
HP has taken an ax to its work force on several other occasions in recent years. In June 2010, it announced it was cutting about 9,000 positions “over a multiyear period to reinvest for future growth.” Two years earlier, it disclosed a “restructuring program” to eliminate 24,600 employees over three years. And in 2005, it said it was cutting 14,500 workers over the next year and a half.
In a note to its clients this week, Deutsche Bank analysts said past layoffs “have done little to improve HP’s competitive position or reduce its reliance on declining or troubled businesses.” And despite HP’s assertion that the latest cuts will enable the company to reinvest in other key market areas, Deutsche Bank questioned that rationale because the company “has been restructuring for the past decade.”
The Deutsche analysts also worried that HP does a lot of business in Europe and could be vulnerable to the continuing economic turmoil on that continent. They added that HP hasn’t sufficiently invested in some areas, leaving it “poorly positioned for growth,” and that “we do not see a quick-fix for any of these issues.”
Whitman’s moves will immediately change the leaders within HP’s recently acquired Autonomy division, which makes software for searching for information within companies and government agencies.
Bill Veghte, HP’s chief strategy officer, is replacing Autonomy founder Mike Lynch in an effort to boost the division’s financial performance. The shake-up is likely to amplify investor questions about whether HP blundered last year when it paid $11 billion to buy Autonomy. That deal was announced in August by Whitman’s predecessor, Leo Apotheker, just a month before he was fired.
News of the cutbacks overshadowed the release of HP’s latest quarterly results.
The company earned $1.6 billion, or 80 cent per share, during the three months ended in April, its fiscal second quarter. That represented a 31 percent decline from $2.3 billion, or $1.05 per share, at the same time last year.
If not for several items unrelated to HP’s ongoing business, the company said it would have earned 98 cents per share. That figure topped the average estimate of 91 cents per share among analysts surveyed by FactSet.
Revenue for HP’s fiscal second quarter fell 3 percent from last year to $30.7 billion. That was about $800 million above analyst projections.
“I wouldn’t say we have turned the corner, but we are making progress,” Whitman told analysts.
To pay for severance and other restructuring costs, HP expects to take a pretax charge of about $1.7 billion in the current fiscal year, which ends in October. It expects to take charges of an additional $1.8 billion through fiscal 2014.
HP’s results follow by one day a disappointing fiscal first-quarter report from Dell, one of its largest competitors for personal computers and computer servers. Net income fell 33 percent to $635 million, or 36 cents a share, from $945 million, or 49 cents a share, a year before. Dell reported revenue dropped 4 percent to $14.4 billion from $15 billion a year ago. Dell reported a 12 percent decline in consumer revenue and smaller declines in business and government sales.
Dell also forecast secondquarter revenue that fell short of analysts’ estimates.
Information for this article was contributed by Michael Liedtke of The Associated Press; by Steve Johnson of the San Jose Mercury News; by Madeline Will of the Arkansas Democrat-Gazette; by Quentin Hardy of The New York Times; and by Aaron Ricadela of Bloomberg News.
Front Section, Pages 1 on 05/24/2012