Hewlett-Packard Co said it aims to boost margins by cutting jobs and reallocating spending to more profitable technology services, shrinking its workforce by a net 3,000 jobs, or 1 percent, over three years.
The move, which will result in a $1 billion charge, comes as rivals like IBM and Cisco Systems Inc vie for supremacy in the lucrative business of fitting out corporate data centers that handle communications and store huge amounts of information.
HP bought technology services company EDS in 2008 for nearly $14 billion to expand in the services business, and it said Tuesday's announcement was a further attempt to bolster its enterprise business.
Over the past 20 months, we focused on integrating EDS and improving profitability, said Tom Iannotti, senior vice president and general manager of HP's Enterprise Services. Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business.
HP plans to cut 9,000 jobs over three years as it shuts down older data centers. But it will also add 6,000 new positions over the same period as it invests in more advanced data centers and expands its global operations.
The company currently has about 304,000 employees worldwide and is the world's largest technology company by sales.
HP said the new data centers will feature more powerful computers that help customers run complex applications, and introduce more automated infrastructure. Most of the new hires will be in sales and services, it said.
International Business Machines Corp wants to bolster its services and software business by spending $20 billion on acquisitions through 2015.
Cisco, which has traditionally been a resale partner to HP and IBM, has recently been encroaching in their space, expanding into servers and all-in-one technology services designed to help companies manage their data centers.
HP said severance and asset impairment charges will result in a $1 billion restructuring charge over three years, with half of that to be recorded in the third quarter.
On a net basis, the company sees savings of $500 million to $700 million annually by the end of its 2013 fiscal year.
Shares of HP were up 17 cents at $46.18 by mid-morning trading on Tuesday.