HP Cuts Jobs, Lowers ForecastsHP Cuts Jobs, Lowers Forecasts

Hewlett-Packard said Thursday it will cut 6,000 jobs and expects lower revenues for the third quarter as a global economic slowdown reduces spending.

"Global technology spending has continued to deteriorate," CEO Carly Fiorina said in a conference call. "Our consumer business has been particularly hard hit." Fiorina said revenues for the consumer business are expected to fall 24% for the third quarter, which ends July 31. Overall, the company now expects a revenue decline of 14% to 16% for the quarter.

The job cuts represent about 6.5% of Hewlett-Packard's workforce and are expected to occur in the fourth quarter. The company expects the layoffs to result in a savings of about $500 million annually. Hewlett-Packard had said in April that it would eliminate up to 3,000 jobs.

The news from HP wasn't entirely bad. Fiorina says the company's outsourcing business is expected to grow 20% for the quarter, and consulting is up 9%. Nonetheless, she doesn't see a turnaround anytime soon. "I do not expect a second-half recovery in 2001," she said. "I don't think we can call when a recovery will occur. But certainly in our judgment, it's not going to be a rapid hockey stick up and to the right."

A.G. Edwards analyst Shelby Seyrafi says it's fair to blame some of HP's woes on the economy, but the company also has made strategic mistakes. Before it can recover, he says, HP must make some hard choices. "They have to decide whether they want to be in the PC market at all," he says, "and they've got to figure out whether they can compete in Unix servers."