HP shifts biz to provide more services

Janet Babin Jun 1, 2010
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HP shifts biz to provide more services

Janet Babin Jun 1, 2010
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TEXT OF STORY

Kai Ryssdal: Hewlett-Packard announced a major restructuring today. That word, “restructuring,” is usually code for layoffs — and there will be thousands of them. But HP and other major computer companies are actually changing how they do what they do as well.

Janet Babin reports.


Janet Babin: HP’s automated data centers — those electronic farms that are home to clusters of computers — apparently did their jobs and saved the company money. Unfortunately, for some HP employees, those data centers may have worked a little too well.

Here’s HP Executive Vice President Ann Livermore on a conference call this morning.

Ann Livermore: HP expects to eliminate roughly 9,000 positions over a multi-year period.

The company also announced plans to hire about 6,000 people in sales and global delivery centers. This type of restructuring has become a pattern at many computer hardware companies, like IBM, Oracle and HP. That’s because profit margins on computer manufacturing have become iPad thin.

Joe Colopy: They’re getting a lot of pressure from what’s going on over in Asia and other places that there’s just not enough money to be made there, and they’re not seeing the growth that they need.

That’s Joe Colopy. He’s CEO of Bronto Software, an e-mail marketing firm. He says some of the layoffs are fallout from HP’s acquisition of Electronic Data Systems in 2008. But it also shows how HP has shifted its business model — providing more services and cloud computing. This cloud, or Internet-based software, computing can make companies like HP a lot more efficient.

Colopy: They’re able to have fewer bigger data centers, which means that they don’t need as many people, and also it means that their software costs for running these data centers is going down.

HP officials say the company will save up to $700 million a year. HP also said it will take about $1 billion in charges. Most of that will pay for severance expenses.

I’m Janet Babin for Marketplace.

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