Following declining profits and stiff competition from rival companies, tech firm Hewlett-Packard (HP) has decided to lay off 27,000 jobs by 2014.

Hewlett Packard
Hewlett Packard REUTERS

HP, one of the world's leading PC manufacturers with about 325,000 employees, is expected to save $3.0 to $3.5 billion annually by cutting 27,000 jobs, or 8.0% of its workforce by the end of fiscal year 2014.

The company is offering an early retirement program, so the total number of employees affected will be impacted by the number of employees that participate in the early retirement plan. Workforce reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate.

In addition to these restructuring actions, HP expects to achieve additional savings from non-headcount cost reductions, including supply chain optimization, SKU (Stock Keeping Unit) and platform rationalization, go-to-market strategy simplification and business process improvement, states press release from HP.

Meg Whitman, HP president and chief executive officer, said that cut jobs was necessary for the future of the company though it's a tough decision.

"These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business," said Meg Whitman, HP president and chief executive officer.

"While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders," he added.

The company is planning to use the savings from the lay offs to reinvest back into the company. It expectes to accomplish the restructuring effort by enabling investments in people, processes and technology. These moves are expected to yield significant improvements in efficiency and customer service during the next several years.

HP expects to reinvest savings in each of its business segments to strengthen their ability to stay ahead of customer expectations and capitalize on growing market trends. It will invest in research and development to drive innovation and differentiation across its core printing and personal systems businesses, as well as emerging areas. It will also invest in marketing, sales productivity and tools that simplify the customer experience and make it easier to do business with HP.