- The Washington Times - Tuesday, July 19, 2005

SAN JOSE, Calif. (AP) — Computer and printer maker Hewlett-Packard Co. said yesterday it will cut 14,500 jobs and overhaul its retirement program in a restructuring plan designed to save $1.9 billion annually and bring costs closer to those of competitors.

The cuts — about 10 percent of its global work force of 150,000 — will occur over the next 18 months. Most will affect support jobs such as information technology, human resources and finance. HP has about 58,000 workers in the United States, including 9,000 in the San Francisco Bay area, though the company declined to specify what locations will be hardest hit.

“Our objective is to create a simpler, nimbler HP with … clear accountability and greater financial flexibility,” said Chief Executive Officer Mark Hurd.

The restructuring had been anticipated since Mr. Hurd, former longtime chief executive of NCR Corp., took the new job four months ago after HP’s board fired Carly Fiorina.

HP competes in a broad area of the technology industry where rivals including Dell Inc. in computers and IBM Corp. in consulting services have managed to squeeze higher profits. At the same time, HP’s highly profitable printer and ink business is coming under increased threat.

HP said in announcing the cuts yesterday that sales positions would be minimally affected, and the head count would be little changed in research and development.

As part of the cuts, HP said it will offer a voluntary retirement program to longer-serving employees based in the United States.

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

The company said these 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.

In corporate servers, software and consulting, HP competes against International Business Machines Corp. and its legions of consultants who can advise corporations on technology buying decisions and point to IBM’s offerings.

At the other end is Dell and its efficient personal computer manufacturing and distribution system that HP has had difficult matching.

On Monday, the research firm IDC reported Dell’s PC sales grew by 23.7 percent while No. 2 HP posted an increase of 16.3 percent.

Beginning in fiscal 2007, HP expects to save about $1.9 billion a year from the restructuring, made up of $1.6 billion in labor costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion from the restructuring.

The company said about half the savings will be used to “offset market forces” or be reinvested in the business to strengthen HP’s competitiveness. The remainder is anticipated to add to operating profit.

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