HP is announcing a massive investment and re-launch of their Enterprise strategy. In the announcement HP will invest $1 billion tin the next generation of its Enterprise Services business.

In the announcement they are touting the operational margin benefits and downplaying the elimination of 9,000 jobs.  To be fair the elimination of the 9,000 jobs is over multiple years and seems to be the “fat” from the EDS acquisition.

Here is the “meat” of HP’s announcement

HP will invest in fully automated, standardized, state-of-the-art commercial data centers built on its Converged Infrastructure and operated by its industry-leading management software. Leveraging its experience from its own IT transformation, HP will enable clients to migrate their applications to these modernized infrastructure platforms, allowing them to run their businesses faster and more efficiently.

This 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 clients’ needs. As a result of productivity gains and automation, HP expects to eliminate roughly 9,000 positions over a multiyear period to reinvest for further growth and to increase shareholder value.

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

My Angle: This is an “Investment”?

What is not clear is this so called $1 billion dollar investment. I get the impression that HP is positioning the elimination of jobs and restructuring charge as the investment. This means that it really isn’t putting any money toward actual investment, but instead HP is going to take the loss as the investment. I will try to get HP to clarify this, but it looks like a “head fake” to me.

From a business perspective this is all about HP trying to get their customers to a converged infrastructure. Convergered infrastructure is “buzzword code” for cloud computing and new paradigms in software and service on demand. HP is trying to focus on targeting the people who can best use technology to transform and automate the delivery of services within their enterprises. This is where the cloud comes in.

HP is poised to move aggressively to compete with an end to end offering with a massive field organization. One thing that is interesting is Ann Livermore’s statement on investing in more sales capabilities. This is all about swallowing EDS and removing all the inefficiencies from that deal and then move forward with a cohesive team and offering.

No doubt HP recognizes the new paradigm of cloud computing and this announcement sprinkled with words like transformation, moderization of datacenter, automation, and service delivery. What’s clear is that HP is retrenching to be “modern” and ready to compete. Clearly this is about competing with IBM and Cisco.

I see this as a big opportunity for growing startups and VC backed companies to be acquired by HP. Ann Livermore hints to acquisitions will be coming fast.

My big question is: can HP reinvent itself? We saw EMC and VMWare talking “Journey to the Private Cloud” a few weeks ago at EMC World and just recently SAP was really hammering home the notion of on demand and on premise cloud computing and software delivery.

I’m excited to see HP put forward this new vision. Can they pull it off? If they can then Cisco and IBM will feel the pain.

Update: Some twitter activity on this post.

HP clarified the investment vs charge issue. I’m embedding the call transcript as that update.

Transcript: HP Enterprise Transformation June 1, 2010

More on the HP Comments re: 1 Billion dollar investment vs charge

First, we are investing a total of approximately $1 billion that we will take as a restructuring charge against GAAP only earnings over the course of this initiative. Because the actions are being taken over multiple years, we can only account for about half of the charge in Q3 2010.

The balance will be taken over the remaining course of the transformation.

The charges relate largely to severance with the balance going towards delivery infrastructure modernization and consolidation.

This will generate a compelling return on investments; we anticipate annual savings of approximately $1 billion by the end of fiscal 2013. We’ll reinvest a portion of this for growth, hiring resources in sales, developing new innovative offerings and improving our competitiveness in the marketplace. After these investments we expect an estimated $500 million to $700 million of savings that will flow through to pretax earnings by the end of fiscal 2013.