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6/1/2010
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HP To Eliminate 9,000 Jobs

Computing giant will increase automation and consolidate data centers as it eyes next-gen IT services.

HP said it plans to cut 9,000 positions from its workforce by fiscal 2013 as it looks to automate many of the tech services it now provides manually.

The computing giant said it would take a $1 billion charge against earnings over a multi-year period to cover costs, including workers' severance payments, associated with the transformation.

The company said the plan would ultimately produce $1 billion per year in gross savings and $500 to $700 million per year in net savings after reinvestment.

HP said it also plans to add about 6,000 positions in growth areas—meaning net job losses at the company will be about 3,000 over the next two-and-a-half years. HP currently employs about 300,000 workers worldwide.

The savings will come in part from the consolidation of data centers, management platforms, networks, tools, and applications, HP said. It will also focus on rolling out standardized services based on its own, internal IT setup.

HP is looking to become a bigger player in the tech services market, currently led by IBM. To that end, the company acquired outsourcer Electronic Data Systems for $13.9 billion in 2008. HP said the integration of EDS is mostly complete and that it will now look to drive efficiencies in the unit through automation.

"Over the past 20 months, we focused on integrating EDS and improving profitability," said Tom Iannotti, HP's senior VP and general manager for Enterprise Services, in a 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," said Iannotti.

By automating some services—such as network monitoring and provisioning--at its data centers, HP could reduce its reliance on offshore labor in low-cost countries like India. So-called offshoring allows service providers to lower costs, but the practice has drawn heat from labor groups and some lawmakers who claim the jobs should be kept in the U.S.

HP's plan failed to impress investors. The company's shares were off .24%, to $45.90, in early trading Tuesday.

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