Hewlett-Packard said it will lay off 14,500 workers over the next 18 months, or about 10 percent of its workforce.

HP said the cuts would save $1.9 billion annually, streamline its operations and improve its business performance.

Most of the cuts will be in support functions, along with "modifications" to HP's U.S. retirement programs. Beginning in January 2006, the company said it would freeze the pension and retiree medical benefits of current employees "who do not meet defined criteria based on age and years of company service."

Instead, HP said it would increase its contribution to employee 401(k) accounts by 2 percent to a total of 6 percent.

The company stressed that the changes will not affect retirees' current benefits or those employees close to retirement age.

HP also said it would dissolve its Customer Solutions Group that sold computer gear to small- and mid-sized customers and government agencies. The group's functions will be merged into three business groups — technology solutions, imaging and printing and personal systems.

Michael Winkler, 60, executive vice president of the customer group, will retire following the elimination of the group. Cathy Lyons was named executive vice president and HP's chief marketing officer. Former palmOne CEO Todd Bradley was named executive vice president of the Personal Systems Group. Former Dell and Wal-Mart executive Randy Mott was named chief information officer.

"Great companies grow and reduce costs," Mark Hurd, HP's CEO and president, said in a statement. "We will do both."