HP: Job cuts in Asia undetermined
On Wednesday, HP said second-quarter earnings and revenue will fall short of estimates. In addition to making job cuts, the company said it will trim costs by tightening discretionary spending and requiring employees to take time off.
"We do not have a specific number on jobs affected in Asia Pacific. Affected managers have the opportunity to interview for positions within the company at the individual contributor level, an HP Asia Pacific spokesperson said when contacted.
"However, we do anticipate some attrition as a result of this strategic action. Most importantly, the effort will be aimed at tuning our existing organization for greater productivity and efficiency," the Singapore-based spokesperson added.
In January, HP said that it would lay off less than 2 percent of its 14,000 employees in Asia Pacific (including Japan). The reductions were part of its restructuring program for the marketing division.
The 280-odd employees were to have been notified in February and the program to be completed by end April.
"The latest job cuts are separate from the exercise in January," the spokesperson confirmed yesterday.
On Wednesday, HP CEO Carly Fiorina said the company wasn't able to predict how badly it would be affected by economic factors when it previously issued forecasts.
"At this time, it is quite clear that the US downturn in the consumer market is now spreading to other regions, notably Europe," Fiorina said.
NYSE-listed HP now expects to see earnings of between US$0.13 and US$0.17 per share for the second quarter, compared with the US$0.44 per share it earned in the year-ago quarter. The figures include a US$150 million charge to write off consumer product inventory. Wall Street analysts were expecting the company to record earnings of about US$0.35 per share, according to First Call.As earlier reported by ZDNet, revenue should be 2 percent to 4 percent lower than the US$11.9 billion recorded in the first quarter. Analysts were hoping to see the company record revenue of US$12.19 billion for the second quarter, according to First Call.
"Recent market data suggests Europe is seeing a slowdown in PC sales that's similar to the one in the United States," Fiorina said, with "growing softness in the retail sector and increasingly competitive pricing followed by a more subtle but just as meaningful slowdown in the enterprise space."
However, Fiorina added that HP did see a slight improvement in its enterprise business, and she said revenue for that division should be even with or slightly higher than they were in the first quarter.
"Recovery is too strong a word," she said, but added cautiously that signs point to the "second quarter being a bottom."
She said the company's earlier forecasts had been based on there being no further deterioration in the US, no slowdown in Europe and stable exchange rates. "Unfortunately our concerns were warranted," Fiorina said.
Consumer PC sales in Europe showed strong gains in 2000, she said, but growth "evaporated" this year. The European consumer businesses overall significantly under-planned, Fiorina said.
Looking ahead, she said the company plans to continue to fight it out to maintain market share in its printer business, with a focus on the low-end of that market. HP did cancel plans to increase capacity for the high-end inkjet business, but Fiorina noted that "we are simply not willing to relinquish any ground in this market."
As for PCs, HP will be "pursuing profitability as opposed to share growth," she said.
However, Merrill Lynch analyst Thomas Kraemer said, "We believe that the losses for printer hardware and PCs are starting to mount. We do not believe that HP has good visibility here."
Goldman Sachs analyst Laura Conigliaro noted, "We believe HP's long-term growth rate is probably closer to 10 to 12 percent, rather than the 15 percent-plus type of growth that the company had been targeting."
"All of HP's key businesses are below plan or at the low end of a planned range," she wrote in a research note, adding that "even the enterprise segment, which HP identifies as its strongest, is pretty weak."
Conigliaro lowered fiscal 2001 earnings estimates to US$1.20 per share from US$1.45 per share.
Overnight, HP closed at US$32.5, up US$0.60.