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HP to cut 9,000 jobs, take $1 billion charge

New $1 billion restructuring plan is designed to streamline enterprise services, but the initiative will result in job cuts for 9,000 people.

Hewlett-Packard is spending $1 billion and cutting 9,000 jobs in a restructuring designed to consolidate and invigorate its enterprise services.

The company announced Tuesday that it plans to spend the money to invest in a series of commercial data centers that will offer enterprise customers a more integrated platform on which to run their businesses. The initiative will also consolidate HP's data centers, networks, and applications. But as a result of the increased streamlining and automation, HP expects to eliminate around 9,000 jobs, or about 3 percent of its work force, over the next few years. HP has approximately 304,000 employees worldwide, according to a Fast Facts page on its Web site.

To pay for the enterprise restructuring, HP will take a charge of about $1 billion over an unspecified number of years that will be included in its financial results. Once the restructuring is complete, the company said it expects to save around $1 billion each year before taxes and between $500 million and $700 million after taxes and reinvestments.

"Over the past 20 months, we focused on integrating EDS and improving profitability," Tom Iannotti, senior vice president and general manager of HP Enterprise Services, said in a statement. "Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business. These next-generation services will enable our clients to benefit from the combined technology and services leadership that only HP offers."

Specifically, HP plans to expand its Converged Infrastructure (or data center of the future, as the company touts it) into the cloud to offer enterprise customers more scalable and integrated technology services. And as HP finally finishes swallowing up EDS, it expects to add back 6,000 jobs in various areas over the next few years, leading to a cumulative loss of 3,000 jobs.

In its most recent quarter, HP reported revenue rising 13 percent to just over $30 billion, and earnings up as well to $1.09 per share, on what the company called "strong performance across every region." Even so, CEO Mark Hurd warned not to expect big spikes in corporate spending in the near future.

This is hardly the first restructuring or major round of layoffs for the company. In 2002, HP revamped one of its Technology Services segments to smooth things over following its acquisition of Compaq. In 2005, HP announced another restructuring along with expected job cuts of 14,500 in an attempt to trim expenses.

Then in 2008, HP picked up computer services firm EDS for $13.9 billion as its foothold into the world of corporate and enterprise IT services. To integrate EDS, the company announced that it would lay off 24,600 employees over three years but said it expected to add back about half of the lost jobs by reinvesting the savings.

HP also has spent a significant amount of money to gain some traction in the mobile market. The company recently announced that it's buying Palm for $1.2 billion. HP said it expects to invest heavily in Palm's WebOS to use the mobile operating systems on tablet PCs, Netbooks, and phones.

Update, 8:55 a.m. PDT: Added information on Converged Infrastructure and background on previous restructurings and job cuts.