cut 6,000 jobs as revenues fall short
HP CEO Carly Fiorina reported the companys Q3
revenues will skid 14 percent lower than last years third
quarter, prompting another round of layoffs. The CEO said 6,000 HP
workers are getting notice of layoffs during the first half of
August, with the actual job reductions coming during the
companys fourth quarter. The layoffs were the largest in
Fiorinas two-year tenure as CEO, and the steepest in company
HP issued the revenue warning about three weeks
before its official Q3 numbers were to be released, and five days
before the quarter ended. Investors sold the stock down 6.5 percent
on the news to $24 a share.
Fiorina said HP Q3 revenues dropped largely on
declining sales in the companys consumer businesses, its PC and
printer products. Corporate-related businesses were improving in the
period. She pointed to upswings in the support, consulting and
outsourcing businesses for the company during Q3, but said our
consumer business is being particularly hard hit, with revenues
expected to be down 24 percent.
The 6,000 layoffs wont deliver savings to the
company until the start of the 2002 fiscal year, the earliest
possible period Fiorina hopes for a turnaround in HPs overall
I do not expect a second-half recovery in
2001, she said. We have not expected that for some time.
Frankly, for planning purposes, I dont think we can call for
when a recovery will occur but it certainly isnt going
to be a rapid hockey stick up to the
HPs head count has being doing the climbing
during 2001, going from 90,000 to 93,000 even after 1,700 layoffs in
marketing and another 3,000 management positions were cut in the
current quarter. The latest announcement didnt identify a
specific sector of the company where the layoffs would take place. HP
had already gotten 80,000 of its employees to voluntarily take eight
vacation days off or a 5-10 percent pay cut in what it called the
Payroll Savings Program. That program will save HP $130 million in
this fiscal year; the layoffs are expected to save the company $500
million next year. HP may have to take a charge against its profits
to pay severance to the laid off employees.
Fiorina said the layoffs are based on a series
of assessments we have been doing over the past several months. This
is not a knee-jerk reaction. In the US, this will be a performance
and skills-based program. The steep drop in PC sales was taking
a job toll at other vendors; Dell and Compaq both laid off thousands
of employees in the weeks before HPs latest layoffs. HP has
also cut back on travel, cell phones and executives use of
company cars this year.
HP will also be divesting itself of
non-core assets through the rest of its fiscal year,
which ends on Oct. 31. There will be more decisions around
outsourcing and divestitures not included in this 6,000 number,
Fiorina told analysts in a briefing conference call. HP is already
outsourcing most of its manufacturing, so further outsourcing will
come in areas such as its accounts payable processes.
While PCs and printers were weakening and
along with the latter, HPs high-profit printer supplies
business HPs service activities were growing.
Outsourcing grew 25 percent and consulting grew 15 percent in
constant currency; HPs support business is expected to post
gains of 9 percent in constant currency.
The greatest source of weakness is the consumer
business, Fiorina said adding that HP believes economies
around the world were continuing to weaken during Q3.