HP/Compaq finalises layoff details

Hewlett-Packard (HP) will finish its planned 15,000 layoffs by the end of financial year 2003, with 10,000 of those layoffs...

Hewlett-Packard (HP) will finish its planned 15,000 layoffs by the end of financial year 2003, with 10,000 of those layoffs completed by November 2002, said chairman and chief executive officer Carly Fiorina today at a meeting with financial analysts.

HP continues to believe cutting 15,000 positions is the "appropriate" reduction needed following its acquisition of Compaq, Fiorina said.

She also said HP was pushing forward by a year plans to realise a $2.5bn (£1.7bn) cost saving resulting from the acquisition. That saving will now be attained in 2003, claimed Fiorina.

As many positions as possible will be eliminated through voluntary departures. In the US, 9,000 employees have been offered enhanced early retirement packages, according to Fiorina.

HP also continues to hire in high-growth segments of its business, including its imaging and printing and services divisions, she said.

In her early remarks, Fiorina discussed compensation plans for her and former Compaq chief executive officer Michael Capellas, who is now HP's president.

During his proxy campaign to defeat HP's acquisition of Compaq, former HP board member Walter Hewlett criticised the company's apparent intention to reward top executives with hefty incentive packages following the deal's completion.

Fiorina said there would be no raises for her and Capellas until at least 2003, adding that HP and Compaq salaries had been frozen for "some time".

"We have reaffirmed that no one will have an opportunity for an increase until all our employees are eligible," she said.

Taking the stage after Fiorina, Capellas said that the PC market remained depressed. He anticipated HP's PC unit revenue would stay flat or show only minor growth in 2003 before rebounding to 5% to 7% growth in 2003.

Revenue from the unit is likely to drop from $12.1bn in the first half of 2002 to $9.5bn to $10.5bn in the second half. Capellas' figures are pro forma, combing results from the prior operations of HP and Compaq.

HP's imaging and printing business will be its most lucrative, with anticipated revenue of $10bn to $10.5bn in the second half of 2002 and 10% growth forecast for both fiscal years 2003 and 2004, Capellas said.

HP anticipates a 5% to 7% sequential revenue drop from its second quarter of this year to the third, driven by poor PC results, according to chief financial officer Bob Wayman.

Weak consumer PC sales in the second quarter led to an overstocked channel, he said.

Tuesday marks the one-month anniversary of the new HP, Capellas noted. The company's executives appear to be still feeling the effects of their nine-month battle to win approval of the acquisition: References to the Hewlett-led shareholder fight dotted their morning remarks.

"It's amazing how much you can get done when you don't have to count votes. It's extraordinary," Capellas said.

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