HP  Tuesday said it hopes to save $1.9 billion a year through a massive reorganization in which it will cut 14,500 jobs, or around 10% of its workforce. It will also link sales and marketing efforts more closely to business units, eliminating the Customer Solutions Group which sold to enterprise customers.

Few positions will be cut in sales or research and development. Instead, HP will eliminate management layers and restructure support functions, for a saving of $1.6 billion a year in staff costs. It will also cut U.S. retirement benefit programs, saving a further $300 million a year, it said.

The company won't benefit fully from the savings until 2007, but in its 2006 fiscal year it expects to save between $900 million and $1.05 billion, it said. About half of those savings will be turned into operating profit, the company said. In the year to April 30, HP had revenue of $83.3 billion.

HP's financial performance has been uneven in recent quarters. The company appears to have stemmed the losses in its PC and server groups, but those divisions are not as profitable as management and shareholders would like. HP has its printer business to thank for most of its recent profits, but the company trimmed positions from that group earlier this year in order to further reduce costs.

When the Customer Solutions Group (CSG) is closed, sales staff there will transfer into three business units: Technology Solutions Group, Imaging and Printing Group, and Personal Systems Group. CSG's head, Michael Winkler, will retire at the end of this month, and senior sales positions will be created in each of the three business groups.

CEO Mark Hurd separated the imaging and personal systems groups last month, undoing a change made by former CEO Carly Fiorina.

The moves give each group more control over its business, HP said.

CSG was HP's point of contact with market segments such as the public sector, small and medium-size businesses, or consumers. Those relationships will also be divided between the three business segments, with the technology solutions group taking on public sector customers, the personal systems group handling small and medium-sized businesses and the imaging group dealing with consumers, Hurd said in a conference call with analysts.

The IDG News Service is a Network World affiliate.