Layoffs needed because market is changing so rapidly: HP's Whitman
Hewlett-Packard CEO Meg Whitman said Wednesday the company embarked on another round of layoffs in part because the technology market is changing so rapidly.
"It's remarkable what's happening to our services business. As new technologies come in, we've got to restructure that labor force to low-cost locations, to much more automation than we have today," she told CNBC's "Squawk on the Street."
On Tuesday, Hewlett-Packard announced it would cut 25,000 to 30,000 positions as part of its restructuring, which will split the company into two separate firms, one focused on enterprise services and one dedicated to its legacy hardware business.
The reductions will primarily impact workers at HP Enterprise Services, the company's business and technology services unit.
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The layoffs come on top of 55,000 cuts announced in recent years and would further reduce Hewlett-Packard's 300,000-person workforce by about 10 percent.
The cuts over the last four years were focused on helping HP achieve a cost structure that was in line with its revenue trajectory, Whitman said. The reductions announced Tuesday will help HP expand its profit margins, she added
"These cuts are never easy, but it's the right thing to do because we have to now get to the next phase of the HP journey," she said.
Whitman will serve as CEO of the services-focused Hewlett-Packard Enterprise when it splits from its hardware business, which will be known as HP Inc, in November.
The company expects the layoffs will save about $2.7 billion a year, though Hewlett-Packard said it will take a $2.7 billion charge to carry out the reductions. Some of those costs will begin accruing in the fourth quarter of this year.
The company also expects the share of its workers employed overseas in low-cost locations to grow to 60 percent by 2018 from 42 percent today.
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Whitman said the companies would return Hewlett Packard to profit next year following the split. She had previously said that would happen prior to the separation.
Asked what makes her confident that growth will happen this time, she identified the separated companies' focus, their "competitive sharpness," and their ability to achieve the right capital structure.
"It's hard to forecast in markets that are as changing, as fast as ours, but I think we have a good handle on this now." she said. "We feel really good about our product lineup, our services lineup, and our go-to-market strengths, which I think will stand us in good stead for FY 16."