By MSNBC Staff

May 23, 2012 – Computer giant Hewlett-Packard said today it plans to lay off 27,000 workers, or about 8 percent of its workforce, over the next two years as part of a massive cost-cutting plan.

The move will generate annual savings of $3 billion to $3.5 billion as it exits fiscal 2014, the company said in a release. The world’s No. 1 personal computer maker also said most of those savings would be reinvested into the company.

“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,” CEO Meg Whitman said.

Steep 31 Percent Drop in Warnings

The numbers tell the tale: HP’s net income fell to $1.6 billion, a whopping 31 percent decline compared to last year’s second quarter earnings. Revenue took a much smaller hit, but it’s still down 3 percent over the past year. HP hopes to save around $3 billion a year from the labor reduction.

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. The layoffs are expected to be complete by October 2014.

HP said it expects to use the savings to boost in three main areas, described as “cloud, big data and security.”

50% Share Price Drop in Past Year

Shares of Hewlett-Packard (HPQ) rose about 7 percent to $22.48 in after-market trading on news of the company’s cost-cutting plan and quarterly results. The share price has fallen nearly 50 percent over the past year.

Tech shares were among the day’s biggest decliners in the market Wednesday as a weaker-than-expected revenue forecast from Dell Inc, the third-largest computer maker, spurred fears that global tech spending was declining faster than had been previously anticipated.

News of the cutbacks overshadowed the release of HP’s latest quarterly results.

The company earned $1.6 billion, or 80 cent per share, during the three months ending in April, its fiscal second quarter. That represented a 31 percent decline from $2.3 billion, or $1.05 per share, at the same time last year.

Company to take $3.5 Billion in Charges

If not for several items unrelated to HP’s ongoing business, the company said it would have earned 98 cents per share. That figure topped the average estimate of 91 cents per share among analysts surveyed by FactSet.

Revenue for HP’s fiscal second quarter fell 3 percent from last year to $30.7 billion. That was about $800 million above analyst projections.

“I wouldn’t say we have turned the corner, but we are making progress,” Whitman told analysts.

To pay for severance and other restructuring costs, HP expects to take a pre-tax charge of about $1.7 billion in the current fiscal year, which ends in October. It expects to take charges of an additional $1.8 billion through fiscal 2014.