*NEWS*HP TO CUT ANOTHER 1,020 NW JOBS

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Date: Wednesday May 11, 2005 10:36:00 am
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    HP plans to cut 1,020 NW jobs

    The company, citing competitive pressure, says it will use
    buyouts to trim printer group workers in Corvallis, Vancouver and Boise

    May , 2005

    Responding to new competitive threats to its highly profitable printer
    division, Hewlett-Packard Co. plans to reduce its Northwest work force by more
    than 1,000 jobs — 1,900 nationwide — through voluntary buyouts.

    Since HP’s Imaging and Printing Group is concentrated in the Northwest, the
    cutbacks hit this region hardest. About 570 people will leave their jobs in
    Corvallis, the company said, along with 100 in Vancouver and 350 in Boise.

    HP employed about 9,600 people altogether in Oregon, Washington and Idaho.
    The downsizing, first reported Wednesday by The Idaho Statesman, trims the
    company’s work force in the three states by more than 10 percent.

    “It’s a result of the overall competitive environment,” HP spokeswoman Monica
    Sarkar said Wednesday. She said the cutbacks will reduce costs and help HP keep
    printer prices low to retain the company’s market leadership.

    Cracks in the printer group are just the latest troubles for HP, which fired
    Chief Executive Officer Carly Fiorina in February and replaced her the following
    month with former NCR Corp. chief Mark Hurd. The company has been losing ground
    in a battle against low-cost computer makers and now faces similar challenges
    from some of the same companies in its highly lucrative Imaging and Printing
    Group.

    Inexpensive new digital products bearing names such as Dell, Samsung, Epson
    and Kodak have forced down industry profit margins and jeopardized HP’s
    lucrative printer franchise, said Brent Bracelin, analyst for Pacific Crest
    Securities in Portland.

    Printers, scanners, digital cameras and related products in the Imaging and
    Printing Group provide about one-third of HP’s revenue, he said, and more than
    two-thirds of its profits.

    But the group’s profits slipped by 3.6 percent in the first quarter, compared
    with the same quarter in 2004. Bracelin said HP call ill afford to lose ground
    in printers, given that its long-suffering computer business is barely in the
    black.

    “The last bastion of hope for HP is now showing signs that it is coming under
    pressure from competition,” said Bracelin, who does not own HP stock.

    HP’s printer business is still relatively strong, Bracelin said, but it’s
    smart for the company to start cutting costs so that it can match competitors’
    prices and hold market share. Market share is especially important in the
    printer business, where most profits come from sales of replacement ink
    cartridges.

    The company no longer discloses the size of its work force at individual
    sites. Recently, it had about 4,000 workers in Corvallis, 3,700 in Boise and
    roughly 1,900 in Vancouver.

    HP employs about 150,000 people worldwide, but has indicated it plans to
    steadily reduce that number and has allocated substantial reserves for employee
    severance payments and other costs associated with job cuts.

    The company made voluntary severance offers to an undisclosed number of
    employees in April, Sarkar said, and told employees Tuesday how many took HP up
    on its offer.

    She would not say what the employees will receive from the company in
    exchange for accepting voluntary severance. The Idaho Statesman reported
    severance deals would pay at least five months’ wages, but not more than 14
    months’, with the amounts varying by the length of time employees had worked for
    HP.

    The voluntary reductions will substantially reduce the need for further cuts
    in the Imaging and Printing Group, Sarkar said, though she would not rule them
    out. However, she said the company remains committed to operating in Corvallis,
    Vancouver and Boise.

    HP’s share price closed Wednesday up 3 cents, at $21.03, on the New York
    Stock Exchange.

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