DHAKA: HP announced plans to cut another 25,000 to 30,000 jobs, as part of its plans to split into two companies.
At an analysts meeting on the future of HP Enterprise, the company said it targets USD 2.7 billion in annual cost reductions following the demerger, in order to reach its long-term target for an operating margin of 7-9 percent.
The restructuring will result in one-time costs totaling USD 2.7 billion, to be taken from fiscal Q4 over the next three years, reports telecompaper.com.
HP forecast annual growth in organic revenues and operating profit in fiscal 2016 for the Enterprise business. Revenue growth will be driven by continued strength in servers, storage and networking, and stabilization in services and software, helping to offset negative currency effects.
The continued focus on supply chain productivity, a disciplined approach to discretionary spending and the shrinking workforce will help profit reach an estimated USD 0.75-00.85 per share in the coming year. Adjusted EPS is forecast at USD 1.85-1.95 and excludes the around USD 1.10 per share in charges for the spin-off and restructuring.
HP Enterprise expects to generate USD 5.0-5.2 billion in cash flow from operations and USD 2.0-2.2 billion in free cash flow in fiscal 2016.
This includes separation cash payments of USD 0.4 billion and restructuring cash payments of USD 1.2 billion.
At least 50 percent of free cash flow will still be returned to shareholders, in the form of USD 400 million in dividends and the remainder in share repurchases.
At the meeting, HP executives also outlined the strategy for HP Enterprise going forward.
The company will focus on facilitating a hybrid cloud environment for customers. It expects cloud revenue in fiscal 2015 to be approximately USD 3 billion and to grow over 20 percent annually for the next several years.
Over a third of the new company's revenue will come from enterprise services, but HP expects service revenue will still be flat to 2 percent lower in fiscal 2016. The focus on cost reductions should improve Enterprise Services' operating margin to 6-7 percent in the year.
BDST: 2043 HRS, SEPT 16, 2015
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