HP to cut 14,500 jobs, overhaul retirement

SAN JOSE, Calif. – Striving for Dell Inc.’s efficiency and IBM Corp.’s breadth, Hewlett-Packard Co. said Tuesday it will cut 14,500 jobs and overhaul its retirement plan in a move that all but buries the legendary company-employee bond known as the “HP Way.”

The computer and printer maker once known for treating employees like family said it will save $1.9 billion a year as it trims its global work force of 151,000 by 10 percent over the next 18 months.

HP did not specify where jobs will be lost. But executives said support jobs will be most affected – in information technology, human resources and finance – as they weed out inefficiencies.

“Cost structures and revenue growth go hand-in-hand,” said chief executive Mark Hurd, who has been on the job four months. “We know that only by having a competitive cost structure can we compete aggressively in the marketplace, thereby growing the company for our employees, customers and shareholders.”

Hurd was hired away from NCR Corp. with a mandate to perform painful surgery that HP’s board had sought but failed to obtain from Carly Fiorina. The board fired Fiorina as CEO in February.

Tuesday’s was just the latest in a series of moves by the Palo Alto company to become more competitive in an industry dominated by lower-cost rivals. Critics contend that such moves have obliterated the workplace philosophy espoused by William Hewlett and David Packard, who founded HP in 1939.

But Hurd, like his predecessor, argues that the changes are necessary.

Rivals including Dell in computers and IBM in consulting services have managed to squeeze higher profits. At the same time, HP’s highly profitable printer and ink business is coming under increasing threat.

Though HP has remained largely profitable, its stock has underperformed most of its rivals.

Shares of HP lost 39 cents, to $24.53, in Tuesday trading on the New York Stock Exchange. The company’s stock has risen some 19 percent since Jan. 1, but remains well below its peak during the technology boom.

“Our objective is to create a simpler, nimbler HP,” Hurd said.

Beginning in January, HP will freeze the pension and retiree medical-program benefits of current employees who don’t meet defined criteria based on age and years of company service. The company said it instead plans to boost its matching contribution to most employees’ 401(k) plans to 6 percent from 4 percent.

HP said the changes won’t affect benefits currently received by retirees or eligible employees who are longer-serving and close to retirement age. Existing employees will retain benefits they have already earned.