Hewlett-Packard Co. (HP) announced Thursday that it is slashing revenue forecasts for its fiscal third-quarter and laying off an additional 6,000 employees due to "deteriorating global economic conditions and related weakness in technology spending."
The company said that it now expects its revenue for the quarter ending July 31 to decline between 14 percent and 16 percent year-over-year, including a 3 percent negative currency impact.
"Economies around the world continue to weaken as we move through the quarter," Carly Fiorina, HP's chairman and chief executive officer (CEO), said during a conference call with analysts Thursday.
The company said that its consumer business suffered the brunt of the spending slowdown, and forecast that revenue in the unit would plummet 24 percent over last year.
"Our greatest source of weakness is consumer spending which has taken a ratchet down, and that is true throughout the world, " Fiorina said.
The company also said it expects its gross margins to be in the 25 percent to 25.5 percent range, due to low product volume competitive pricing pressures.
The company's outsourcing and consulting businesses are faring better, however, and HP forecasts that they will grow 20 percent and 9 percent, respectively, in the third quarter.
The 6,000 job cuts will take place in the fourth quarter and will result in an annual savings of US$500 million, the company said.
Affected employees would be notified during the first two weeks of August, and the layoffs will be based on a series of assessments the company has recently made on employee skills and performance, Fiorina said.
"This is not a knee-jerk reaction," Fiorina said of the cuts.
The company will be relying more heavily on outsourcing in areas like accounts payable, she said.
The company already laid off 1,770 employees in January and 3,000 in April, again citing a shortfall in technology spending. HP had also revised its fiscal second-quarter earnings, and met the lowered expectations with revenue of $11.6 billion, a 4 percent drop from the second quarter of last year.
In other cost-cutting moves, HP announced a "payroll savings program" earlier this month, whereby it asked employees to take voluntary pay cuts and vacations. HP said Thursday that 80,000 employees have signed up for the program and that the move is expected to result in savings of $130 million for the remainder of the fiscal year.
HP said that its cost-cutting moves will translate into a sequential reduction in expenses of 2 percent to 4 percent.
Fiorina did not give analysts any indication that the company's results would improve in the near term.
"I have been consistent in public for months now that I do not expect a second-half recovery for 2001," Fiorina said.
Despite the company's revised financial expectation, Fiorina said that the company will be "barreling ahead" with its already announced product releases.
She added that HP is sticking to its strategy of divesting its noncore businesses and concentrating on what it is the most competent at, particularly the low-end printer market.
Shares of the company's stock (HWP) were down 8.14 percent to $23.59 in noontime trading Thursday.
HP is set to release its fiscal third quarter results on Aug. 16.