HP to accelerate job cuts

Hewlett-Packard chief executive Carly Fiorina said on Tuesday that the company will deliver 15,000 job cuts in two instalments: two-thirds by 1 November and the remaining one-third in fiscal 2003.

Fiorina, speaking in Boston at HP's first analysts meeting following the acquisition of Compaq, said the company has accelerated its layoff target date for the good of those affected.

"Moving faster is good for employees and reduces uncertainty," she said. "We don't want to traumatise the organisation multiple times."

HP will be able to meet its targets through "voluntary programmes" such as early retirement packages. About 9,000 employees are eligible for the programmes, she said.

Fiorina said the company is moving faster on integrating the companies and reiterated confidence that HP could cut more than $2.5bn (£1.71bn) in costs through non-personnel items such as procurement and real estate. Cost-cutting will be crucial if the company wants not only to survive but also thrive, in part because it doesn't foresee a recovery in information technology spending until next year.

"We are confident we can operate on an accelerated timetable," said Fiorina. "We have to make sure we can continue to integrate and deliver the value."

HP president Michael Capellas and chief financial officer Bob Wayman were among the notable speakers in Boston on Tuesday. The company is also hosting a meeting at the San Jose Convention Center focused on customers.

Fiorina's opening comments focused on employee relations at a time when layoffs are hovering. She said the company is focused on retaining key talent and noted that HP's management ranks are among the "strongest in the industry".

Fiorina also commented on her compensation, which was an issue during former board member Walter Hewlett's proxy fight. "Neither Michael (Capellas) nor I will receive a salary increase until all employees are eligible," said Fiorina.

Citing a slowing economy, weak technology spending and looming layoffs, Fiorina noted that HP employees have had to deal with salary freezes. She said any talk about increases for top managers will be pushed into fiscal 2003, which begins 1 November.

Fiorina's remarks kicked off what is likely to be a common theme about HP's integration progress. Wall Street analysts are also looking for more financial details on HP's outlook, but are mixed on whether the company will deliver.

Capellas echoed Fiorina when he kicked off a talk about industry issues, noting the company's integration efforts are ahead of plan.

"It's amazing how much you can get done when you don't have to count votes," said Capellas, alluding to HP's drawn-out proxy battle with Hewlett.

The outlookHP also provided Wall Street with its outlook beyond the current quarter, chief financial officer Wayman projected revenue of $35bn to $36bn for the second half of HP's fiscal 2002. For fiscal 2003, he projected revenue growth of 4 percent to 6 percent, and for the following year, growth of 7 percent to 9 percent.

The company didn't give earnings projections for upcoming quarters. However, gross margins for the second half for HP's fiscal year are expected to be 25 percent to 26 percent, on par with first-half figures. Gross margins for fiscal 2003 are projected to be flat, with some improvement in fiscal 2004.

Operating expenses as a percentage of revenue are expected fall from between 18 percent and 19 percent in fiscal 2003 to between 15 percent and 17 percent in fiscal 2004.

"That's when the restructuring will kick in," said Wayman.

By unit, HP's imaging and printing group is expected to post the strongest revenue growth for the 2003 and 2004 fiscal years, gaining 10 percent annually. The personal systems business is expected to have the weakest growth, with little or no sales gains in fiscal 2003, but rebounding to between 5 percent and 7 percent in 2004.

Wayman also said that HP would be "raising a little debt in the next month or two" to bolster its cash position, which stands at $13bn. In that tally, HP includes cash and cash equivalents, short-term investments and certain liquid long-term investments.

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