HP cuts 9,000 jobs in data center consolidation effort

June 1, 2010 -- HP is cutting 9,000 jobs and taking a charge of $1 billion as it begins refitting its data centers on the HP Converged Infrastructure Architecture.

Described by HP as an "initiative is designed to enhance the client experience and better position Enterprise Services for growth," the company announced plans to consolidate its Enterprise Services' 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 (see "HP strikes back with Converged Infrastructure Architecture")."

The unfortunate side effect will be the elimination of approximately 9,000 positions over the next few years.

Tom Iannotti, senior vice president and general manager for HP Enterprise Services, said "Over the past 20 months, we focused on integrating EDS and improving profitability. 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."

HP bought EDS for $13.9 billion in 2008 and rebranded it HP Enterprise Services in September of last year.

To fund the consolidation HP will take a charge of approximately $1 billion over a multiyear period that will be included in its GAAP financial results. HP expects that, once completed, the transformation will generate annualized gross savings of approximately $1 billion and net savings after reinvestment in a range between $500 million and $700 million.

HP's most recent earnings report was strong, as it posted net earnings of $2.2 billion for fiscal Q2 (up 28% from the prior year) with $4.5 billion in revenue in the Enterprise Storage and Server segment. However, software was down 1% from '09 and services only grew 2% to $8.7 billion. See Dave Simpson's blog: "Solid storage growth in HP's Q2 report."

HP will reportedly create a few thousand new positions in support of the consolidation effort.

There may be a silver lining for any storage pros facing unemployment. Sister site Enterprise Storage Forum reports that the job market for storage networking pros is on the grow. Brocade, CommVault, EMC, NetApp, Oracle and VMware all appear to be hiring (see "NetApp Leads Rebound in Storage Networking Jobs").