HP Enterprise Services Business to Cut 9,000 Jobs

HP (NYSE:HPQ) says it will eliminate 9,000 jobs from its Enterprise Services Business over an unspecified multi-year period. The workforce reduction and resulting savings will come as the result of HP consolidating its own data center infrastructure on its Converged Infrastructure line of data center products including servers, networking switches, and storage.

HP (NYSE:HPQ) will cut 9,000 jobs in its HP Enterprise Services Business division, the company has announced, as the result of a data center consolidation to move its infrastructure onto its own Converged Infrastructure product lines.

The workforce reduction, which comes two years after HP announced its acquisition of IT services firm EDS, will consolidate the business unit’s commercial data centers, management platforms, networks, tools and applications "to create a more scalable, modernized and automated IT infrastructure that will better serve its clients’ needs," according to a statement issued by HP.

HP’s services business has not recovered as well as the rest of the company so far, with HP reporting a 1 percent decline in revenue when it reported earnings in February, and more recently a 2 percent increase in services revenues, for the quarter reported May 18. HP also said for the most recent quarter that Infrastructure Technology Outsourcing revenue increased 6 percent year over year while revenue in Technology Services and Business Process Outsourcing were roughly flat year over year. Application Services revenue was down 2 percent.

Subscribe to Channel Insider. Click here for our ultra-quick email newsletter registration form.

HP says the new services initiative is designed to improve client experience and better position the division for growth. The 9,000 positions will be eliminated over a multi-year period, HP said.

"Over the past 20 months, we focused on integrating EDS and improving profitability," says Tom Iannotti, senior vice president and general manager, HP Enterprise Services, in a prepared statement. "Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business. These next-generation services will enable our clients to benefit from the combined technology and services leadership that only HP offers."

While HP has been optimistic in statements about its services business, the company has not shared numbers about big deals signed.

"HP projected a very positive tone about the health of its services business," says Toni Sacconaghi, senior analyst at Bernstein Research, in a report about the HP workforce reduction. "The company noted that it expected to deliver above market growth in FY11, stated momentum was strong, and highlighted a positive signings trajectory.

"That said, we note that the company has still not provided the dollar amount of services signings like other large services vendors, which makes it more challenging for investors to monitor the health of the services business," he adds.