Current HP CEO Meg Whitman announced the job cuts Tuesday during HP’s 2015 Securities Analysts Meeting. Once the split is complete on Nov. 1, Whitman will become president and CEO of HP Enterprise. (The other half of the company, HP Inc., will be run by Dion Weisler.)
Tuesday’s layoff announcement is in addition to HP’s previously announced headcount reduction of 55,000.
In an effort to reduce expenses by $2 billion annually, the job cuts will reduce HP’s 300,000 workforce by 10 to 12 percent. The job reductions will result in a $2.7 billion charge that will start in HP’s fourth quarter, which ends Oct. 31.
The cuts are expected to finalize the cost structure for HP Enterprise. “We’ve done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring,” Whitman said in a prepared statement.
HP says that HP Enterprise, which will have more than $50 billion in annual revenue, has the potential to exceed $1 trillion in sales during the next three years.
At the analysts’ meeting, Tim Stonesifer, who will become CFO of HP Enterprise, provided a financial outlook for fiscal 2016.
HP expects the new enterprise company to report GAAP per-share earnings in the range of 75 cents to 85 cents in the fiscal year ending around October 2016. Excluding the costs of restructuring and the separation, HP Enterprise projects per-share earnings of $1.85 to $1.95.
HP Enterprise expects to increase operating profits year-over-year by focusing on supply chain productivity and lowered spending. The reduced workforce will be a factor too, of course.
Minus the separation and restructuring payments, HP expects Hewlett Packard Enterprise’s normalized free cash flow to be $3.7 billion in fiscal 2016.
Cloud Strategy Update
Whitman also gave an overview of Hewlett Packard Enterprise’s cloud strategy. Revenue in fiscal 2015 is expected to be around $3 billion, ramping up more than 20 percent annually during the next few years. The estimate includes revenue from HP’s enterprise group, software, and enterprise services segments that support customers’ cloud efforts.