Fiorina says HP to achieve cost cuts ahead of schedule
By Brian Bergstein AP Business Writer
SAN JOSE, Calif. (AP) – Hewlett-Packard Co. is cutting costs ahead of schedule and will exceed some of the financial targets it set for its hard-fought acquisition of Compaq Computer Corp., chief executive Carly Fiorina said Tuesday.
Kicking off a daylong meeting with financial analysts in Boston that was broadcast over the Internet, Fiorina said HP still plans to hack 15,000 jobs from its 150,000-person work force, with 10,000 of the cuts coming before the end of the fiscal year, Nov. 1. The rest will occur in the next fiscal year.
The Palo Alto-based technology giant, which closed the $19 billion Compaq deal one month ago, had predicted the acquisition would generate $2 billion in cost savings in 2003 and $2.5 billion in 2004.
Partly because the job cuts are happening faster than originally planned, Fiorina said the company now expects to save $2.5 billion in 2003 and $3 billion the following year.
Meanwhile, the charges from paying severance, closing duplicative facilities and other costs associated with the deal are expected to total $2.1 billion.
“We are moving faster and achieving more,” Fiorina said. “We think moving faster on headcount reductions is good for employees, particularly when it reduces uncertainty.”
The job cuts largely are being carried out through voluntary retirement programs rather than layoffs, she said.
When an analyst asked whether HP might need to eliminate even more than 15,000 jobs, Fiorina did not rule out the possibility of a second round of layoffs if business conditions worsen. But she said she was confident that cutting 15,000 positions would reduce costs appropriately without damaging growth opportunities.
“We feel this is a prudent step,” she said. “We don’t want to traumatize the organization multiple times.”
The Compaq acquisition developed into one of the country’s harshest proxy fights after Walter Hewlett, son of an HP co-founder and until April a member of the board, questioned the company’s ability to meet its stated financial goals for the deal.
However, Fiorina said HP’s forecasts for the revenue that will be lost as a result of the deal remain accurate or even conservative.
“It’s amazing how much you can get done when you don’t have to count votes,” quipped Hewlett-Packard’s new president, former Compaq CEO Michael Capellas. “It’s absolutely extraordinary.”
Chief financial officer Robert Wayman said second-half revenue is expected to be $35 billion to $36 billion. Analysts had been estimating $36 billion, according to Thomson Financial/First Call.
But HP did not give earnings-per-share estimates. Fiorina said conditions in the industry remain too unpredictable.
Coming into the day, analysts surveyed by Thomson Financial/First Call were predicting earnings of 20 cents per share in the current third fiscal quarter and 26 cents per share in the fourth quarter.
HP shares gained 12 cents Tuesday to close at $18.97 on the New York Stock Exchange.
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