Hewlett-Packard Co. last month announced it plans to lay off 14,500 employees, or 10% of its work force, over the next six quarters in an effort to cut costs. The restructuring is expected to save HP $1.9 billion annually beginning in fiscal 2007.
The news came just three months after Mark Hurd was brought in as CEO to reshape HP in the wake of Carleton Fiorina's departure.
"Our objective is to create a simpler, nimbler HP with fewer matrices, clearer accountability and greater financial flexibility," said Hurd, in a company conference call announcing the restructuring.
More than half of the staff reductions will be in support functions, such as information technology, human resources and finance, according to the company. Layoffs will begin in the fourth quarter.
While most analysts applauded Hurd's announcement, some said they expected faster changes. "We believe some may be surprised that it will take six quarters to implement the plan," said Benjamin A. Reitzes, analyst at UBS Securities, in an investment research report. Overall, Reitzes called the plan a "solid step" for HP.
Under the plan, the Palo Alto-based company said it will embed sales and marketing directly into the business units, modify its retirement programs and improve accountability through simpler reporting and fewer management layers.
That means the Customer Solutions Group, which is responsible for enterprise and small- and medium-sized business sales, is being scuttled.
Hurd said flattening the structure will give each business segment-Technology Solutions Group, Imaging and Printing Group and Personal Systems Group-greater control and help HP to better serve customers.
"The commercial sales function will be merged directly into the individual business segments, providing each business segment with a tighter link to the customer, greater line of sight into operations and greater control over its P&L, including operational elements such as a sales coverage model, demand generation and field selling calls," Hurd said.
Reduction in sales staff will be minimal, and senior sales positions will be added, the company said.
"Sales positions throughout the company will see little impact so that customers experience minimal impact," said Ryan Donovan, director of corporate media relations at HP.
As part of the restructuring, Cathy Lyons, who has been with HP for 26 years, was promoted to exec VP-chief marketing officer, from senior VP-business and imaging printing. Lyons was not available to comment for this report.
According to Donovan, Lyons' top priority will be creating a marketing plan. "Cathy and HP's horizontal marketing team are focused on driving a comprehensive global marketing strategy that speaks to our customers more effectively and enables our businesses to remain or become the best in class in their markets," he said.
Donovan added: "HP will continue to be focused on ensuring our b-to-b strategy evolves with the needs of the marketplace and our customers."
HP said it was premature to predict whether reductions would be made in its advertising and marketing budgets. That area was not reviewed as a part of the restructuring plan, according to the company.
"In the area of advertising ... there is no doubt there are opportunities for us to be more effective and/or more efficient in other areas than the areas I have described here," Hurd said. "That is work yet to be done." He said the focus has primarily been on "trying to get the underpinning cost structures right on a sustainable, multiyear basis to put us in a position to go to the market and win."
Internal marketing during the transition will also be important for HP in the next several months. "Employee involvement throughout this restructuring phase has and continues to be vital," Donovan said. "During his first 100 days as CEO, Mark Hurd visited 24,000 employees at eight sites in three countries. Senior management has coordinated extensive meetings and question-and-answer sessions with employees to address their questions about the restructuring," he said. "Communication with employees will remain an ongoing priority." M