HP slashes wages in bid to combat profit slump

Hardware Big-name companies resort to penny-pinching schemes to reduce costs.

Silicon Valley's biggest companies have embarked on cost-cuttingreduce costs. programmes to minimise the damage to profits inflicted by woeful conditions in the global PC market.

Hewlett Packard is reducing the pay of 2,400 middle-ranking and senior executives by approximately five per cent for a three-month period from 1 August. The move follows a disappointing financial results and last month's announcement that earnings and revenue growth for its third quarter to 31 July would not meet expectations.

HP also said it would close its US offices for the four days between Christmas and New Year.

David Thompson, HP UK marketing manager, said the pay cuts would probably apply to UK managers, although he added there was no definite word from the US.

Thompson denied that any temporary office closures would affect channel stocks. 'The intention of the cost-cutting measures is to reduce costs where they will have no effect on the business. In the UK and most of Europe, we close for Christmas anyway. The channel normally stocks down at that time of year,' he said.

An HP representative said the manufacturer would also be looking to 'innovate our way out of this situation', through measures such as video-conferencing to cut flight expenditure. The representative added the manufacturer expected the business cycle to turn around by the start of 1999.

Meanwhile, chip maker National Semiconductor will ask its 13,000 employees to take an unpaid break this autumn to cut costs.

The move followed the company's decision in April to cut about 10 per cent of its workforce in reaction to the slump in the chip market, where a series of PC price wars, a slowdown in US and European demand and the Asian recession has bruised a number of large vendors.

Last month, Intel closed two Oregon plants for eight days and the chip giant is looking to reduce its workforce by five per cent through attrition and voluntary departures. US chip vendor Novellus also said it would extend cuts to 20 per cent of its workforce.

IDC senior analyst Simon Pearce said: 'Anyone involved in the PC business has to find a way of cutting costs even further. The cost of a typical business configuration has fallen so dramatically in the year that there is less money in the system,'