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 user 2008-08-05 at 12:17:28 pm Views: 62
  • #20162
    HP tells staff in Corvallis ink business is ‘broken’
    Layoffs coming – Internal memos show the inkjet printer division is in worse straits than the company has revealed publicly
    , 2008 Hewlett-Packard Co.’s inkjet printer business, built on
    homegrown Oregon technology that spawned decades of high-tech,
    high-wage jobs in two Northwest cities, is drying up.HP campuses in
    Corvallis and Vancouver have already suffered as the company outsourced
    manufacturing work and pared jobs. Now, in detailed accounts of
    internal company meetings in April and June provided to The Oregonian,
    HP executives spell out in extraordinarily blunt terms the decline of
    what had long been HP’s most dependable and profitable technology –
    and the engine of its Northwest operations.”Our growth rate is
    negative. That means it’s shrinking,” HP Vice President Sam Angelos Jr.
    told Corvallis workers at an employee-only meeting in the spring.The
    hyper-secretive company has refused to publicly detail plans for job
    cuts or business strategies in Corvallis. It’s been years since HP
    would even discuss the number of employees there or at any other
    site.Workers there learned about an impending round of job cuts in late
    April. Broad outlines of the company’s plans soon leaked out, but HP
    dismissed those reports by saying that no decisions had been made.But
    according to the account of the April meeting, Angelos said HP planned
    to lay off as many as 300 workers, shutter a key production line and
    send its work to a contractor overseas.In that meeting, HP laid bare to
    manufacturing workers what it has not told outsiders: Basic parts of
    its printer business are, as Angelos put it, “broken.”

    manufacturing operation in Corvallis is overfunded and underused, he
    said, and needs to reinvent itself to stay ahead of more efficient
    competitors — and other divisions inside the
    $100-billion-in-annual-sales company that want a slice of the printer
    group’s operating and research budget.”We have to make sure that we
    have a sense of urgency,” Angelos told employees. “There’s a great big
    bull’s-eye painted on us, and everybody wants a piece of that
    pie.”Asked for additional comment Thursday, HP declined to go into
    specifics but provided this written statement: “As a company, HP is
    focused on identifying and pursuing growth opportunities and maximizing
    efficiencies to create best-in-class solutions for our customers.
    Consistent with this strategy, the Imaging and Printing Group (IPG)
    will continue to consider changes that will serve to maximize its
    growth opportunities, to invest resources most appropriately and to
    ensure customer satisfaction, market success, and shareholder
    value.”Coming changes in the printer group cap a transformation at HP,
    which has relied on its printers when other parts of the company
    struggled. With printer sales falling and HP aggressively pursuing new
    opportunities in corporate services, the company is shifting priorities.

    HP’s operations in Corvallis and Vancouver would seem likely to be big losers in that shift
    of HP’s 2,500 employees in Corvallis focus on the company’s highly
    profitable inkjet printers, which the company developed there in the
    1980s. HP had 10,000 employees and contractors in Corvallis as recently
    as a decade ago. A series of reorganizations and cost cuts marginalized
    the site economically, although it still plays a key role in developing
    HP technology.

    The printer group — which also includes laser
    printers, scanners and other “imaging” technology — remains highly
    profitable, and sales are still growing. So from the outside, the
    crisis Corvallis managers describe isn’t readily apparent.Within the
    inkjet segment, though, the company paints a gloomy picture of falling
    printer and ink sales. Quick action is required, executives and
    managers said in meetings with employees, to reinvent the printer group
    as a smaller, leaner organization more focused on research.Changes also
    are expected at the Vancouver site, where HP employs more than 1,000
    people. Earlier this year, HP put its 175-acre campus in east Vancouver
    up for sale with plans to lease back part of the site for at least five
    years.Other details of Vancouver’s changes are less clear. The site
    focuses on inkjet printer design and marketing but stopped printer
    manufacturing in the 1990s when HP outsourced that work.

    HP was
    Silicon Valley’s original technology company, earning a reputation for
    innovative approaches to new ideas. In 1976, it exported that
    creativity to Corvallis, where the company’s engineers invented its
    inkjet technology while experimenting with calculator printers.Inkjets
    evolved from simple text printouts to full-color mosaics with clarity
    and brightness that eventually rivaled photo labs. As computers
    sprouted on desks in offices and homes around the country, then the
    world, HP printers popped up alongside them. In the late 1990s, the
    rest of the company ran into trouble as its computer business matured,
    prices fell and computing profits thinned.Under chief executive Mark
    Hurd, hired from NCR Corp. in 2005, HP has systematically cut jobs and
    costs and increasingly targeted its research at areas with the greatest
    profit potential. After slashing costs elsewhere in the company, Hurd
    is turning to the printer group. With less rapid growth, printer group
    chief Vyomesh “VJ” Joshi is less able to guard his own expenses behind
    buckets of profits.”VJ has very clear marching orders from Mark Hurd,”
    Angelos told Corvallis employees in April: All businesses, even big
    moneymakers, must improve sales and profits every year.    With HP’s
    other businesses in PCs and corporate services now thriving, the
    company is telling employees that the inkjet division has two big

    People are buying fewer printers, printing fewer pages
    and therefore purchasing less of HP’s highly profitable ink.The
    company’s manufacturing operation in Corvallis — designed for
    high-volume output — is laboring under high fixed costs that can’t be
    cut without shedding many employees.”Because business is hurting so
    bad, we’re not utilizing our factory,” Angelos said.HP’s new
    variable-cost plan staffs the Corvallis site to current, lower demand
    levels and enables the company to add staff only at times it’s
    needed.To reduce costs, HP plans to close Fab 21, a manufacturing line
    on the company’s Corvallis campus, company officials said in both April
    and June, according to accounts of those meetings. HP will outsource
    the work overseas.HP also plans, officials said, to shut down some
    Corvallis manufacturing on weekends, instead of running factories all
    week long, as it does now. The move will trim the company’s overtime
    costs and, in turn, employee pay.The shakeup, they said, will reduce
    HP’s 650 Corvallis manufacturing workers by 35 to 45 percent — roughly
    between 225 and 300 jobs. HP gives several weeks to all workers
    designated for layoff to find new jobs in the company and severance
    payments to those who don’t.

    HP remains the dominant inkjet
    maker, controlling 47 percent of the world market, according to
    industry researcher Gartner Inc. Its closest rival, Canon, has 18
    percent.But competitors are making inroads, particularly in the U.S.
    Rising energy costs also are pressuring the printing business by
    boosting paper prices, according to Gartner’s Federico de Silva.
    Additionally, he said, younger computer users, turned off by long
    reports, prefer short summaries or online scanning.Gartner’s estimates
    suggest that overall printed pages haven’t actually begun a decline, de
    Silva said, but probably will about 2012.Just five years ago, printers
    produced about 80 percent of HP’s profits, according to Pacific Crest
    Securities in Portland. Today, printers provide about 40 percent of
    HP’s profits, the firm estimates, and the number is forecast to fall to
    a third after HP completes its pending $13.2 billion acquisition of
    Electronic Data Systems Corp., a corporate services giant.”Just as a
    percentage of their overall revenue, the printing operations become
    less and less meaningful,” Pacific Crest analyst Brent Bracelin
    said.Though the changes in Corvallis are painful, Bracelin said, they
    make sense.”From a Wall Street perspective,” he said, “moving to a
    variable-cost model is the right thing to do.”

    HP set its cuts to begin this month and wrap up in May.
    Corvallis, they will further diminish what had long been the
    community’s major economic engine, other than Oregon State University.
    In recent years, HP has vacated three buildings on its 150-acre campus,
    and earlier this year, it gave one to OSU to use free for 20 years. The
    company is now looking for a tenant to lease Fab 21, the plant it plans
    to close next year, according to an official speaking in the June
    meeting.But in a June meeting with employees, HP manager Chris Camomile
    said the company remains committed to maintaining a presence in
    Corvallis, according to the account of that meeting.HP has a strong
    corps of skilled workers and engineers in Corvallis, and the site has
    contracted for work through 2013. Additionally, Camomile said, its
    labor costs are 15 percent lower in Corvallis than in San Diego, where
    much of HP’s printer group leadership works.The future is very bright
    for Corvallis,” he said. “I do recognize, though, that our future has
    changed from manufacture to R&D development, and that’s going to
    require a much smaller work force.”

    Boise Not Mentioned in Latest HP Layoff Rumors
    could be coming at the Hewlett-Packard campuses in Corvallis and
    Vancouver. Details of an internal meeting reported today by The
    Oregonian newspaper suggest that H-P plans to lay off as many as 300
    workers in the Northwest, shutter a key production line and send its
    work to a contractor overseas. The inkjet printers that are the focus
    of the Northwest-area campuses have long been among H-P’s most
    profitable and dependable technology. But H-P Vice President Sam
    Angelos Jr. told Corvallis workers this year that the manufacturing
    operation there is overfunded and underused. The California-based
    company has about $100 billion in annual sales.In Corvallis, H-P
    employees about 2,500 people, and in Vancouver, H-P employs more than
    1,000 people. The focus in Vancouver is on inkjet printer design and