Hewlett-Packard Company (HPQ) to Cut UK Workforce


Reportedly, Hewlett-Packard (HPQ) or H-P will lay off 1,124 employees in the U.K. in the first three months of fiscal 2014 as part of the restructuring initiative started in May 2012.

Though H-P has not disclosed the job cut locations, according to Britain’s labor union, Unite union, Bracknell, Sheffield and Warrington sites are the likely targets.

H-P in its last reported quarter (fourth-quarter 2013) confirmed that approximately 24,600 people had been laid off since the program started. In fiscal 2013, the company saved approximately $2 billion in labor costs. It expects to save another $1.1 billion in 2014. The company expects total labor layoff under the plan to be between 33,000 and 34,000 by the end of fiscal 2014.

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H-P benefited from the restructuring plan as its operating expenses decreased 2.9% year over year in fiscal 2013 due to savings from the labor restructuring initiative and better alignment of costs to revenues.

As such, H-P is reeling under pressure from the secular decline in the PC market. According to the latest IDC report, PC shipments are expected to decline 10.1% to 314.2 million units in 2013. Despite the disappointing 2013 projections, IDC expects the rate of decline to moderate in 2014, aided by system refreshes and enterprise system migrations beyond Microsoft’s (MSFT) Windows 7.

Nonetheless, the company’s traction in the cloud, security and big data segments are positives, going forward. Restructuring initiatives and management changes are also expected to keep the company on the growth path. The company’s increased focus on the software business will also help it to grow its profits in the long term.

However, continuing macroeconomic challenges, tepid IT spending and competition from International Business Machines (IBM) and Oracle (ORCL) are the headwinds, going forward.

Hewlett-Packard has a Zacks Rank #3 (Hold).

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