HPQ HP Inc

By Robert McMillan 

Hewlett-Packard Co. said Tuesday that it plans to cut another 25,000 to 30,000 jobs as it whittles down its services group and restructures the company into separate entities.

The layoffs are part of a plan to cut $2.7 billion in annual costs, the company said. They amount to approximately 10% of the company's workforce of 300,000 and will primarily affect the company's enterprise services group, which has struggled to expand profit margins in the face of a changing services business.

"These restructuring activities will enable a more competitive, sustainable cost structure for the new Hewlett Packard Enterprise," Chief Executive Meg Whitman said in a news release. "We've done a significant amount of work over the past few years to take costs out and simplify processes, and these final actions will eliminate the need for any future corporate restructuring."

The cuts will be part of a $2.7 billion charge that will start to show up in the earnings for the company's fourth quarter, which ends in October. In addition to the layoffs, this charge includes $700 million in cost reductions from things such as site reductions and other cuts as the company splits in two.

The layoffs are in addition to a 55,000 head count reduction that the company previously announced.

Observers had been expecting tens of thousands of layoffs since May, when H-P had warned that it expected to incur $2 billion in restructuring charges, but today was the first time that the company spelled out the exact number of layoffs it expects. H-P didn't say when these layoffs will occur.

Hewlett Packard Enterprise, which is expected to split from the current Hewlett-Packard on Nov. 1, will primarily sell servers and software that corporations use to run their operations. That business is threatened by big companies renting computing power from Amazon.com Inc., Microsoft Corp. and International Business Machines Corp., among others.

The new enterprise company, set to trade under the stock symbol "HPE", is expected to have more than $50 billion in annual revenue.

"Hewlett Packard Enterprise will be smaller and more focused than H-P is today," said Ms. Whitman, who will be president and CEO of the new company.

The remaining company, HP Inc., will push personal computers and printers.

H-P said it expects the new enterprise company to report per-share earnings between 75 cents and 85 cents in the fiscal year ending around October 2016. Excluding per-share costs of about $1.10 from the company's restructuring and the separation, Hewlett Packard Enterprise projects per-share earnings between $1.85 and $1.95.

The enterprise company expects to generate cash flow from operations of between $5 billion and $5.2 billion in the next fiscal year and free cash flow between $2 billion and $2.2 billion. Hewlett Packard Enterprise plans to return at least 50% of that free cash flow to shareholders through dividends and share repurchases.

Hewlett Packard Enterprise said it sees revenue from itscloud-related businesses growing more than 20% annually for the next several years.

Write to Robert McMillan at Robert.Mcmillan@wsj.com

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(END) Dow Jones Newswires

September 15, 2015 18:21 ET (22:21 GMT)

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