HP announces $1 billion expansion, 9,000 job cuts

June 1, 2010 - By Justin E. Gehrke

In a press release published this morning, the technology giant HP (NYSE: HPQ) announced that it plans to invest $1 billion dollars in expanding its Enterprise Services operations. Billed the “next generation” of the company’s business services, HP hopes to attract and retain corporate clients, through new offerings and enhanced delivery of service.

Sounds great, right? It may be great news for potential customers, but for employees the move could prove disastrous. That’s because HP also took the opportunity to announce that it would eliminate around 9,000 jobs over a period of several years. For their part, HP seems to view the reduction of employees as a positive sign, since it will mean that increased automation has resulted in increased productivity.

The cuts are deemed necessary to ensure additional capital is available to reinvest it and ensure the company’s growth. The residual benefit is expected to be increased value in shares of the company’s stock.

Part of HP’s plans include the creation of commercial data centers, which use the company’s Converged Infrastructure concept as its foundation for operations. Additionally, the company will use its proprietary infrastructure management software to automate operations and, as a result, reduce the number of employees required to maintain it.

According to Tom Iannotti, senior VP and general manager of HP Enterprise Services, the expanded business services will allow HP to “…enable our clients to benefit from the combined technology and services leadership that only HP offers.” The initiative will ultimately allow HP to consolidate commercial data center operations that are better scaled to meet the needs of the company’s clients and allow for additional growth in the future.

Though the planned expansion will cost around $1 billion to complete, HP expects its cost saving measures to trim around $1 billion dollars, in gross savings (annually), and from $500-700 million, in net savings (pursuant to reinvestment of annual savings).

No specific details were provided as to what geographic or operational areas would be directly affected by the announced job cuts or the timeline on which they would be implemented.

Source: HP to Invest $1 Billion to Launch New Era of Enterprise Services