HP to invest $1B in automating data centres

IT giant Hewlett-Packard (www.hp.com) announced on Tuesday it would invest $1 billion in the next generation of its Enterprise Services business, where it will automate data centers and make other operational changes in its IT services business.

The initiative will cut some 9,000 jobs over several years. Along with these job cuts, the company also plans to hire about 6,000 new workers to add to its sales force and global delivery centers. HP currently has about 300,000 employees.

Almost exactly a year ago HP announced it would cut 2 percent of its workforce, approximately 6,400 employees, after its profits for the second quarter of 2009 plummeted by 17 percent to $1.7 billion.

Built on HP's technology and software, the move will provide customers with new offerings and improved service delivery.

HP will invest in fully automated, standardized commercial data centers built on its Converged Infrastructure and operated by its management software.

The company will use its experience from its own IT transformation to help customers migrate their applications to these modernized infrastructure platforms. As a result, customers will be able to run their businesses faster and more efficiently.

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

The initiative is designed to "enhance the client experience and better position Enterprise Services for growth."

HP will consolidate 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 customers' needs.

As a result of its increased productivity and automation, HP expects to cut about 9,000 positions over a multiyear period to reinvest for further growth and to increase shareholder value.

The company will fund this investment by taking a charge of approximately $1 billion over a multiyear period that will be included in its GAAP financial results.

Once the initiative is completed, HP says it expects to generate annualized gross savings of approximately $1 billion and net savings after reinvestment in a range between $500 million and $700 million.

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