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 user 2005-05-31 at 9:42:00 am Views: 68
  • #9527

    Analysts predict more HP layoffs
    As many as 15,000 could
    lose jobs in current quarter

    , May , 2005

    Analysts say Hewlett-Packard Co. could cut as many
    as 15,000 jobs after recent comments from new Chief Executive Officer Mark Hurd
    in which he said the company needs to reduce costs to become more competitive.

    In his first earnings report, Hurd said Tuesday the company is reviewing
    “every element of operations and cost structure,” and plans to take a $100
    million charge in the current quarter in connection with workforce reductions.

    HP did not give details on the layoffs. The company also said it does not
    comment on analyst reports.

    But analysts Toni Sacconaghi of Sanford C. Bernstein & Co. and Steven
    Milunovich of Merrill Lynch estimated that HP would cut its workforce of 151,
    000 by 5 to 10 percent, roughly 7,500 to 15,000 people.

    “Management made it clear the current cost structure is not best in class and
    that significant cost reduction activities were on the horizon,” Lynch wrote in
    a research note.

    He said he expects HP to make an announcement on job cuts before the next
    quarterly report in August.

    Sacconaghi said the job cuts could boost HP earnings per share by 20 to 40

    “We do expect a material workforce reduction,” he wrote.

    Analyst Martin Reynolds of Gartner said the 15,000 figure seems reasonable.

    “I could see larger numbers as possible,” he said in an e-mail. “HP still has
    to cut expenses. … The problem is, HP is staffed for profit levels that are
    not returning to the industry.”

    Analyst Michael Dortch of Robert Frances Group said cutting about 5 percent
    of its workforce would allow HP to maintain the status quo.

    But, he said, cutting “closer to or more than 10 percent would spell trouble”
    for HP in terms of competing for large corporate customers.

    “Substantial layoffs might make HP shareholders happy in the short term,” he
    said by e-mail.

    But citing stiffer competition from rivals IBM, Dell Inc. and Sun
    Microsystems, Dortch added: “If they aren’t balanced by clear … and specific
    plans for at least maintaining if not growing the company’s enterprise-
    computing businesses, it’s not impossible to envision those businesses being
    acquired by a stronger competitor — or, worse for HP, customers of those
    businesses being even more actively wooed away by competitors than is happening

    HP reported a 9 percent rise in second-quarter profit on Tuesday.

    The company’s shares dipped a penny, or less than 1 percent, to $22.50 in
    Friday’s regular trading.