-The process began this week, and we are looking to restructure 10-15 percent of our workforce," HP spokesperson, Hugh Scott, told ZDNet Australia. This means a reduction of between 400 and 600 people from the 4000 strong Australian workforce.
-We can't provide specific details on business units or geographic regions for commercial reasons," said Scott. -We will look at business needs across the region and organise the units appropriately. This rationalisation is a result of the merger process and is not a reflection of the performance of the employees involved."
Hewlett-Packard CEO Carly Fiorina has said the company will deliver 15,000 job cuts in two instalments: two-thirds by Nov. 1 and the remaining one-third in fiscal 2003.
Fiorina, speaking at HP's first analysts meeting following the acquisition of Compaq Computer, 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 programs" such as early retirement packages. About 9,000 employees are eligible for the programs, she said.
Fiorina said the company is moving faster on integrating the companies and reiterated confidence that HP could cut more than US$2.5 billion in costs through non-personnel items such as procurement, real estate and renegotiation of contracts. 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," Fiorina said. "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 due on Tuesday. The company is also hosting a meeting focused on customers at the San Jose Convention Centre.
. Fiorina's opening comments focused on employee relations at a time when layoffs are hovering. She said the company is determined to retain key talent and noted that HP's management ranks are among the "strongest in the industry."
During the Q&A session with the executives, though, the question arose as to whether, in light of HP's dimmer projections for growth, the company was laying off enough people to avoid future disruptions among employees.
"We think that 15,000 number represents the right number of positions," Fiorina said. "But if growth rates decline (from HP's restated rates), obviously we would need to take appropriate action."
In other remarks, Fiorina 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," Fiorina said.
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 November 1.
Fiorina's remarks kicked off what is likely to be a common theme about HP's integration progress. Wall Street analysts are looking for more financial details on HP's outlook but are mixed on whether the company will deliver.
Capellas echoed Fiorina during his speech on 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.
But the wisdom of HP's entry into the volatile PC market--another of Walter Hewlett's bones of contention during the merger struggle--was still being questioned. During the Q&A, one analyst asked why the merged company didn't simply drop that part of its business.
Fiorina insisted that PCs are an important part of the company's portfolio, generating a lot of cash and sitting at the centre of the bundles HP provides to both businesses and consumers--bundles that allow it to not only sell printers and cameras to consumers but also sell IT services and software to businesses.
Capellas admitted, however, that the company has an oversupply of consumer PCs, owing to a slowdown in sales in April and May.
"HP has seen slower than anticipated sales...in the consumer market," Capellas said. But "We will adjust sales and drive inventory down."
"The PC business needs to have a competitive cost structure and a competitive business model," Fiorina said, adding that the company was working hard to tighten things up.
Indeed, HP expects to be able to tighten the strings on its PC business to the tune of US$1 billion.
The company projects it will save US$1 billion by trimming the number of model lines it offers as well as consolidating research and development for Compaq and HP PCs, and reducing the cost of procuring components and managing PC inventory, said Duane Zitzner, executive vice president of HP's Personal Systems Group.
HP will begin phasing out its Vectra and Omnibook commercial PCs this summer, he said. However, the PCs will be available at least through the end of the year.
The outlook
HP also provided Wall Street with its outlook beyond the current quarter. CFO Wayman projected revenue of US$35 billion to US$36 billion 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 to 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," Wayman said. He outlined $2.6 billion in restructuring costs, a figure he said was slightly higher than previously stated owing to the voluntary separation program Fiorina spoke of.
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.
"You'll see us with a loss in the second half," Capellas said. "Volume is going to be down." But HP will transition to new PC product lines that are less costly and more innovative, he said, so "you'll see us coming into profitability next year. We know what we have to do. It's all about execution."
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 US$13 billion. In that tally, HP includes cash and cash equivalents, short-term investments and certain liquid long-term investments.
News.com's John Spooner contributed to this report.
