HP plans to cut jobs, reorganise and put pressure on partners that lead with the HP brand but then “hollow out” the offering with competing products.

Hewlett Packard Chief Executive Mark Hurd outlined a strategy of voluntary and involuntary
redundancies that will reduce the company’s workforce by 14,500 jobs over the next year and a half.
In total the restructuring will deliver Hurd a US$1.9 billion saving each year, US$300 million of which will come from reductions in retirement benefits schemes, the rest from salary reduction.

Approximately half the savings will be used to offset market forces or reinvested in the business to strengthen HP’s competitiveness. The remainder is anticipated to flow through to operating profit. In addition, the company plans to axe the Customer Solutions Group sales, which is responsible for the enterprise and SMB sales function will be dissolved into the individual business sections.

The company will be divided into three groups; the Technology Solutions Group (TSG), Imaging and Printing Group (IPG) and finally Personal Systems Group (PSG). Technology Solutions Group will host a sales force for the enterprise, Personal Systems Group will have an SMB sales force and the Printing and Imaging Group will focus on the consumer sector.

The cuts will cost US$1.1 billion in charges spread over the next six quarters (starting 4th quarter) as the cuts occur. This excludes a previously announced $100 million restructuring charge to be taken in the third quarter.
The company plans to reduce head count by focusing on three principal problem areas, explained Hurd. There are people doing work that simply doesn’t need to be done anymore, then there are staff working to do inefficient processes and then there are areas where there are multiple people looking at the same problem/function.

The majority of staff reductions will come in support functions, such as information technology, human resources and finance. The remainder will be made inside business units, in areas where work can be reduced by improving processes and re-prioritizing existing tasks.

While critical functions such as R&D were spared the axe, Hurd said the executive team had focused the restructuring on HP as it is today and when asked, he would not rule out possibly exiting current business areas. While committing the company to continuing with its hybrid channel model, Hurd showed some frustration with the attach rates of HP product going through the channel.

“Our partnerships really come in multiple types and I would tell you that the data would suggest, that we have and I’ll talk about this to our partners, that we have a fair, we have some number of partners let me say it that way, that would lead with HP as a product, but underneath that lead with HP is a contentless HP offering it is basically lead with HP with the brand and then a series non-HP products that attach to that solutions. That is not an interesting partnership relationship to us.

“We will actually be trying to do a focusing within our partner base, really doubling down on those partners that really do come to the party offering an HP solution.” Hurd didn’t indicate that the company plans to reduce its number of channel partners, or its direct sales force either. He did say: “It would not be a bad thing for us if we kept the same number of partners, as long as we had them all focused on HP content.” Hurd also left some room for changing the compensation model to increase the rewards for partners offering HP solutions that haven’t been “hollowed out”.