HP CUTS EMPLOYEE PAY BY 5% , REPORTS A 13% DECLINE
HP CUTS EMPLOYEE PAY BY 5% , REPORTS A 13% DECLINE
2009-02-19 at 3:49:40 pm #21762
Don’t cry for Hurd, Hewlett-Packard; CEO’s pay cut 20% amid sales slowdown
If job anxiety has a sound, it just got louder in Silicon Valley today when its largest company reported an unexpectedly dramatic slowdown in sales for its fiscal 2009 first quarter. One result is that the company is “reducing base pay and certain benefits across the company” beginning this quarter, according to remarks Cathie Lesjak made on the company’s earnings conference call this afternoon.After the call was over, HP distributed more details of the pay reductions, including a 20 percent cut in base pay for its chief executive, Mark Hurd, of 20 percent. Based on the $1.4 million salary he was paid last year, that amounts to a cut of $280,000. That amounts to a rounding error compared with the $42 million Hurd collected in total compensation last year.
Members of HP’s executive council will see their base pay cut 15 percent, with gradually smaller reductions made down to a 2.5 percent cut in the pay of non-exempt wage earners. The company is also capping its 401(k) match at 4 percent and ending the practice of selling shares to employees at a discount in its stock ownership plan .Those steps, however, are not expected to do the trick on their own. “We need to do something more about our cost structure,” Lesjak is quoted in an interview reported by Bloomberg News. “We’re looking at the first quarter results and saying let’s model that that will continue for the rest of the year.”One major reason for the decline in sales was a 19 percent drop in revenue from the company’s cash cow, the imaging and printing group. As CEO Hurd put it in the company’s conference call, “when you don’t have a job you’re not printing as much, is typically how it works.”If you’re in the market for a printer, you might want to pay close attention. Lesjak, in speaking about challenges with inventory in the printing group said, “we need to get that inventory down.The company is still generating a whole lot of cash, enough so that it could spend another $1.2 billion buying up 34 million of its shares. Those shares, which lost 21.5 percent of their value in the last quarter, that got even cheaper in after-hours trading: down $1.94, or 5.7 percent, to $32.14 as of 4 p.m., according to data found on Yahoo Finance.
Boise employer Hewlett-Packard cuts workers’ pay up to 5 percent
Another group of Treasure Valley workers got socked with bad news Wednesday.
Hewlett-Packard said it will cut employee pay up to 5 percent, The New York Times reported.HP, which employs perhaps 3,000 people in Boise, also said it would curtail contributions to its retirement plan and stop a plan that allows HP workers to buy company stock at a discount.Top executives will see even steeper pay cuts. Chief executive Mark V. Hurd’s base salary will be cut 20 percent, while other executives’ salaries will be cut 10 to 15 percent.In reporting its latest quarterly earnings, HP said its quarterly profit dropped 13 percent, and sales ticked up just 1 percent, as even the technology company’s cash-cow printer-ink business was hobbled by the recession.The world’s top seller of personal computers also cut its 2009 earnings guidance, but it was still in line with Wall Street’s expectations.HP shares fell $1.08, or 3.2 percent, to $33 in extended trading, after closing down 26 cents during the regular trading session, before the Palo Alto, Calif.-based company reported its earnings.HP once employed about 3,400 workers in Boise, mostly for its imaging and printing division, at its campus off Chinden Boulevard, between Five Mile and Cloverdale roads. The Boise employees and contract employees for other companies work alongside one another, largely on research, development and marketing of printers, ink and related printing and image-making goods and services.The company has laid off workers worldwide over the past year, though, and has not said how many still work in Boise.Crippled technology spending slammed all but one of HP’s major business lines, including PCs and servers. Only HP’s services division, which bulked up with its $13.9 billion acquisition of Electronic Data Systems, saw an increase.HP earned $1.85 billion, or 75 cents per share, in the three months that ended Jan. 31. That compares with profit of $2.13 billion, or 80 cents per share, a year ago. Without one-time costs, HP earned 93 cents per share, matching analyst estimates
Hewlett Packard Stuns Street with 13% Profit Decline
Shares of Hewlett Packard (HPQ) are indicated down 3% in the pre-market after the tech giant reported profits fell 13% to $1.85 billion, or 75 cents per share, in the three months that ended Jan. 31. That compares with profit of $2.13 billion, or 80 cents per share, a year ago.The company’s sales in its personal computer division fell 19 percent to $8.8 billion. The printer and ink division, which is a big contributor to the company’s bottom line, experienced a 19% decline in revenues. Ink cartridges and supplies fell 7 percent as well.Looking ahead, management predicted EPS would come in between $3.76 and $3.88 per share in 2009. This was a bit below the company’s previous range.
The Bottom Line
We have been avoiding shares of HPQ since our June coverage began, when shares were trading at the $47 level. HPQ currently has a dividend yield of 0.94%, based on last night’s closing price of $34.08. The stock has technical support at the $28 level. If that fails to hold, we could possibly test the $20-22 levels. If the shares can firm up, we see overhead resistance around the $39-41 price area. We would remain on the sidelines for now.