HP cuts 27,000 staff as Autonomy chief Lynch leaves

Mike Lynch, who saw his UK software analytics provider sold to HP last year for £7.1bn, is to be replaced by HP's strategy chief after the company reports a 'disappointing' second quarter

HP has said it will lay off 27,000 people and cut its product and platform portfolio, as it revealed tumbling revenue and profits.

The job cuts come as the company released its second-quarter earnings. Revenue in the quarter was down by three percent year-on-year to $30.7bn (£19.6bn) and profits dropped by 31 percent to $1.6bn, HP said on Wednesday. 

The "restructuring" will allow it to make savings of $3-3.5bn in the 2014 fiscal year, "of which the majority will be reinvested back into the company", it added.

The 27,000 employees, or eight percent of the company's workforce, will be out by the end of 2014. In addition, Mike Lynch, the head of big data specialist Autonomy, which HP bought last year for £7.1bn, will also leave the company. 

Mike Lynch of Autonomy

Mike Lynch shows off Autonomy's augmented reality tool in this 2011 image. Credit: Autonomy

Cambridge-based Autonomy had a "very disappointing license revenue quarter with a significant decline year-over-year resulting in a shortfall to our expectations ", chief executive Meg Whitman said in an earnings call, as transcribed by Seeking Alpha. Lynch will be replaced by HP's chief strategy officer, Bill Veghte.

It is not certain how many of the 27,000 axed staff will be in the UK. HP employs around 20,000 people here, including the 175 who came with the Autonomy deal.

"We do expect the workforce reduction to impact just about every business and region. Beyond this, unfortunately, we do not have anything else to share at this time," a spokesman for HP told ZDNet UK.

Unite believes that up to 1,600 British jobs could be at risk, saying on Wednesday that it and fellow union PCS hope to hold talks with HP's management on the matter soon. About 3,500 Unite members are employed by the technology company, the union said.

"Workforce reductions are never easy," Whitman said on the call. "They adversely impact people's lives, but in this case, they're absolutely critical for the long-term health of the company. Our goal is simple: a better outcome for the customers at reduced costs for HP."

HP hopes to soften the blow by offering workers an early retirement plan, which may reduce the number of redundancies. Apart from sacking people, the company said it will "achieve additional savings" by cutting products and platforms, optimising its supply chain and improving its business processes.

Overall, the plan is to "shift the portfolio to a more profitable mix of higher-growth services". HP will put more money into R&D and marketing in the fields of the cloud, security and big data, it said.

Falling revenue

The second-quarter results revealed that HP's market-leading notebook division saw a three percent revenue drop. However, the biggest declines were in printing, where hardware was down 15 percent and supplies down 12 percent year-on-year, and business-critical systems, down 23 percent over the same period.

"Overall, I feel cautiously optimistic coming out of Q2," said Whitman, who has been chief executive for half a year. "Our results appear to be stabilising. While I wouldn't say we turned the corner, we are making progress."

Whitman pointed out that HP's decline was slowing, and said the poor results of the imaging and printing group were down to "weak consumer demand and natural disasters". She said the division was "working on new pricing models, services and solutions to further differentiate [its] offerings".

On the enterprise side, HP's 3PAR storage systems saw slight growth, but tape and the Enterprise Virtual Array (EVA) line were weak. "This is an anticipated product transition and we're effectively managing the shift to our next-generation storage arrays," Whitman explained.

Whitman said that, despite Autonomy's poor showing so far, its competitive position remained strong, particularly in its cloud software.

"Bill [Veghte] is an experienced software leader who will develop the right processes and discipline to scale Autonomy and fulfil its promise, although it will take a few quarters to see tangible improvements," she said.