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HP's Hurd Announces 10-Percent Cut

Workforce Reduction to Occur Over 18-Month Period

"The Pretty Big One" is the nickname in the San Francisco Bay Area for the 1989 Loma Prieta quake, an event that was enormous and tragic to many, yet fell short of a catastrophic event on the scale of the giant 1906 earthquake.

HP employees are no doubt using the same terminology, as they react to a layoff announcement from new CEO Mark Hurd that fell short of some predictions that called for "The Big One" to roil through the company's Palo Alto headquarters and beyond.

The announcement set a workforce reduction target of 14,500, about 10% of the company (and technically speaking, a decimation), but falling well short of the 25,000 number being thrown about by company outsiders earlier. The reduction will mostly target administrative functions, rather than R&D, and certainly not sales, Hurd said. It will be effected over the next 18 months, and will come with early retirement offers throughout the organization. Hurd did not say what percentage of the reduction will be tied to attrition, but one would expect a large chunk of the overall reduction to come from this source.

Mark Hurd

The company expects these actions to save $1.9 billion annually, "drive growth and increase business performance," Hurd said. "The program simplifies HP's structure by embedding sales and marketing efforts directly into the business units, providing a tighter link with customers," Hurd said. The reduction also targets HP's U.S. retirement programs, especially for shorter-term employees, although the company emphasized that employees will keep all benefits they've already earned.

"After a thorough review of our business, we have formulated a plan that will enable HP to begin delivering its full potential," said Mark Hurd, HP chief executive officer and president. "We can perform better - for our customers and partners, our employees and our shareholders - and we will."

Hurd also announced that it will dissolve its Customer Solutions Group (CSG), which had focused on a variety of business and government customers. It was also announced that CSG's head, Michael Winkler has retired. The group's functionality will be absorbed into HP's Technology Solutions Group (TSG), Imaging and Printing Group (IPG), and Personal Systems Group (PSG).

This move, coupled with Hurd's previous re-separation of the company's printer and PC groups, appears to be a straightforward undoing of some of the latter actions taken by his predecessor. Today's announcements, done in a low-key but decisive manner, also seemed to be part of the new CEO's apparent wish to be a non-flamboyant leader focused on addressing concerns that the company had lost its "Way" in recent years. Early voting from stockholders indicated acceptance of today's announcement, with the stock falling very slightly after a 20% run-up in the past six weeks in anticipation of expected dramatic action from the new CEO.

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.

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ISSJ News Desk 07/19/05 03:27:41 PM EDT

New HP CEO Mark Hurd announced a reduction in HP's employment of 10 percent, to be accomplished over the next 18 months, and mostly targeted administrative departments. He also eliminated the company's Customer Solutions Group, in a continued effort to restore a semblance of the company's former structure.

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