SAN FRANCISCO (AP) — Hewlett-Packard Co. plans to cut 27,000 jobs as the growing popularity of smartphones, the iPad and other mobile devices makes it tougher for the company to sell personal computers.
The cuts announced Wednesday represent HP's largest payroll purge in its 73-year history. The reductions will affect about 8 percent of HP's nearly 350,000 employees by the time the overhaul is completed in October 2014.
Word of the mass layoff had leaked out in media reports late last week, so the news didn't come as a surprise.
HP hopes to avoid as many layoffs as possible by offering early retirement packages.
The company, which is based in Palo Alto, Calif., expects to save as much as $3.5 billion annually from the job cuts and other austerity measures.
HP CEO Meg Whitman plans to funnel most of the savings into developing more products and services that could help the company adapt to technological shifts. Those changes are driving demand for more mobile computing and for software that is provided over high-speed Internet connections, rather than installed on individual computers.
Investors seemed to be delighted with the shake-up. HP's shares surged $2.42, or more than 11 percent, to $23.50 in extended trading Wednesday after the announcement.
"Work force reductions are never easy," Whitman said in a conference call Wednesday with analysts. "They adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced cost for HP."
Whitman's crackdown will immediately change the leaders within HP's recently acquired Autonomy division, which makes software for searching for information within companies and government agencies.
Bill Veghte, HP's chief strategy officer, is replacing Autonomy founder Mike Lynch in an effort to boost the division's financial performance. The shake-up is likely to amplify investor questions about whether HP blundered last year when it paid $11 billion to buy Autonomy. That deal was announced in August by Whitman's predecessor, Leo Apotheker, just a month before he was fired.
News of the cutbacks overshadowed the release of HP's latest quarterly results.
The company earned $1.6 billion, or 80 cent per share, during the three months ending in April, its fiscal second quarter. That represented a 31 percent decline from $2.3 billion, or $1.05 per share, at the same time last year.
If not for several items unrelated to HP's ongoing business, the company said it would have earned 98 cents per share. That figure topped the average estimate of 91 cents per share among analysts surveyed by FactSet.
Revenue for HP's fiscal second quarter fell 3 percent from last year to $30.7 billion. That was about $800 million above analyst projections.
"I wouldn't say we have turned the corner, but we are making progress," Whitman told analysts.
To pay for severance and other restructuring costs, HP expects to take a pre-tax charge of about $1.7 billion in the current fiscal year, which ends in October. It expects to take charges of an additional $1.8 billion through fiscal 2014.
