HP gears up for layoffs, reorg

The job cuts would then be announced on Monday, a source familiar with the company said. As previously reported, as many as 15,000 employees could be let go.

The layoffs are part of CEO Mark Hurd's cost-cutting measures to bring HP's spending more in line with that of its rivals. The Palo Alto, Calif.-based company has been paring down its work force over the past year, making cuts in the storage and server group and in the printing and imaging group that resulted in a $177 million charge during its fiscal second quarter.

An elimination of 15,000 jobs--less than 10 percent of HP's employees--would not be way off base, the source said.

Mark Hurd, CEO, HP

An HP representative said the company declined to comment.

Despite the prospect of massive layoffs, HP's workers are responding favorably to Hurd, who has been in the CEO post only a few months, the source added.

"People feel he is a straight shooter and doesn't mince his words," said another source who is familiar with the management of the company. "People have responded to him positively; they like and respect him and view him as a leader. This response from employees has happened in a much shorter time than was imagined."

The number of jobs lost could extend beyond 20,000 positions, according to estimates reported on Thursday by analysts at research firm Moors & Cabot. Wall Street analysts have suggested HP should make between 5,000 and 25,000 job cuts and even separate its various product lines to keep competitive.

Management shuffle?
Changes to HP's upper management are also expected. Earlier this week, the tech giant named Randy Mott, formerly chief information officer at Dell, as executive vice president and new CIO. It also gave Gilles Bouchard sole responsibility for its global operations.

Last month, HP separated its PC and handheld computer business from its imaging and printing group. Todd Bradley, previously president and chief executive officer at hardware maker PalmOne, was appointed leader of the PC division, allowing Vyomesh "V.J." Joshi to remain as head of the printing business.

"What happened was, a year ago, Duane Zitzner (who headed the PC operations) wanted to retire by a specific date," said the source familiar with the management of the company. "He kept reminding Carly (Fiorina, former HP CEO) that the date was approaching, but she made little effort to fill his position. So when that date came and there was no replacement for Duane, it was put under V.J. But V.J. already had his hands full and the PC business needed a lot of work, so, in the end, it was best to run them separately."

The potential changes could affect HP's management, including Chief Financial Officer Bob Wayman, who has expressed an interest in retiring but who is expected to remain on the team until a suitable replacement is in place, according to analysts at Moors & Cabot.

"The hiring of a CIO--which is effectively a CFO, in that the two jobs overlap so much--was potentially a signal that events are beginning to unfold here," said Mark Stahlman, an analyst at Caris & Co. "I think that enough time has elapsed for Hurd to go through the benchmarking process that he committed to."

At the same time, Hurd has found areas within HP where spending has been underinvested. The part of HP's sales force that helps large corporate customers integrate their computer systems is one area that needs further investment, the source said.

Storage is another area Hurd is focusing on, the source said. During HP's fiscal second quarter, storage revenue fell 6 percent because the company had not expanded its specialist sales force, Hurd said at the time.

Hurd is working closely with Ann Livermore, a longtime HP executive who oversees the company's server and storage group and its services and software, said the source familiar with the management of the company. Industry observers have questioned whether Hurd will keep Livermore in charge of those groups or distribute the duties among others.

"My expectation is that when the dust settles, Ann will be an important person with an increased scope of responsibilities, because she is the surviving HP executive," Stahlman said.

However, HP Chief Strategy and Technology Officer Shane Robison is an executive who Stahlman said could find his role change.

"I think HP needs to make strategy a day-to-day concern through the organization, and my suggestion would be that Robison have that responsibility," Stahlman said. "The problem of the Carly (Fiorina) era is that strategy was divorced from the line decisions, going down the product managers and so forth, and it's one that clearly needs to be addressed."

HP is expected to post its quarterly earnings on Aug. 16, giving the company ample time to announce changes to its work force and to work on its bottom line.