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8/21/2003

Layoffs loom, HP earnings swoon

By Kelly K. Serrano
Times-Call News Group

Hewlett-Packard Co.’s failure to meet expectations for the third fiscal quarter will result in more layoffs in the fourth quarter, a company spokesman said.

“In addition to the 3,500 business reductions we announced last quarter, the $376 million restructuring charge we took in Q3 (the third quarter) now includes an incremental 1,300 reductions for a total expected business reduction of 4,800,” said Brian Humphries, a spokesman with HP’s corporate offices.

HP reported revenue of $17.35 billion for the third quarter, which ended July 31. While that is a 5 percent increase compared with the same period last year, it didn’t meet expectations, he said.

“We’re disappointed we missed (the market) consensus,” Humphries said.

For instance, diluted earnings per share came in at 23 cents. Although that’s up from 14 cents for the third quarter of 2002, it was down 3 cents from market analyst expectations, he said.

“We didn’t execute as well as we should have,” Humphries said.

HP priced some of its products, such as desktop computers, too low to drive its profit margin, and officials already have made adjustments in prices for the fourth quarter, he said.

Humphries said the additional layoffs are not related to the merger with Compaq finalized earlier this year, and will be done companywide except in the Imaging and Printing Group.

Of the 3,100 laid off in the third quarter, 800 were related to the merger and 2,300 to business reductions, he said.

HP expects to eliminate 1,900 jobs for business reasons in the fourth quarter, which ends Oct. 31, and another 600 in fiscal year 2004, Humphries said.

“The third quarter is always tough, but we still should have done better,” Carly Fiorina, HP chairwoman and chief executive officer, said in a written statement. “Nevertheless, we are confident in our strategy and the actions we’re taking. We expect to deliver a strong fourth quarter with every one of our businesses profitable.”

Humphries said HP continues to reduce its transaction processing, call center, information technology and support delivery costs by adding to its offshore staff.

In India alone, he said, HP now has more than 8,000 employees, and it is adding more people in China, Poland, Costa Rica and the Philippines to diversify is offshore efforts.

HP stock closed at $22.11 on Tuesday, down 2 cents.

HP employs more than 6,000 at its locations throughout Colorado, including Loveland and Fort Collins.