Hewlett-Packard Co will fire 6,000 employees, or 6.5 percent of its workforce, and said sales this quarter will miss forecasts as consumer demand withers for personal computers and printers.
The second-biggest computer maker, which has about 93,000 employees, said the firings will take place worldwide, with most occurring in early August.
The company's shares fell US$1.68, or 6.5 percent, to US$24, their lowest price since November 1998.
Hewlett-Packard said sales in the third quarter ending Tuesday will drop 14 percent to 16 percent from a year earlier as home users and businesses pare spending on computers, software and printers. Chief Executive Carly Fiorina in May predicted a decline of as much as 5 percent. She's already trimmed 1,000 workers this year and asked employees to accept reduced pay.
"I don't know that their crystal ball is any clearer than the rest of ours in determining when a pickup will happen," said Bruce Raabe, chief investment officer at Collins & Co, which manages US$500 million in Larkspur, California, and owns Hewlett-Packard shares. "This is a good time to be lean and mean."
The Palo Alto, California-based company said sales of consumer products will fall 24 percent. The back-to-school season, traditionally a good time for computer sales, won't be as strong as expected, Fiorina said.
"The greatest source of weakness is consumer spending," she said on a conference call. "That's true around the world."
Demand for PCs and printers hasn't rebounded after a dismal holiday season last year, as consumers and corporations worry about the economy and put off purchases.
PC shipments in the calendar second quarter dropped from a year ago for the first time since 1986, researcher Dataquest Inc said last week.
Hewlett-Packard has announced that it will fire 6,000 employees worldwide in response to slumping sales. The firm also said its third quarter sales will drop 14 to 16 percent from a year earlier as consumers pare spending on computers, software and printers.
Fiorina has already trimmed 1,000 workers this year and asked employees to accept reduced pay.
The firm is also cutting prices on low-end printers and Fiorina said those reductions will continue. Hewlett-Packard has thus far refused to lower PC prices.
"I don't expect a recovery in the second half of 2001," Fiorina said. "I don't think we can call when a recovery is going to occur, but it's not going to be a rapid hockey stick up and to the right."
Hewlett-Packard had sales of US$11.8 billion in last year's third quarter and was expected to have revenue of US$11.1 billion in the current period, the average estimate in a First Call/Thomson Financial survey of analysts.
Fiorina didn't say whether profit would meet forecasts of US$0.19 a share, the average in a First Call poll.
In June, she told analysts she was "more cautious" about meeting the average earnings forecast, which at the time was 23 cents.
Rival Compaq Computer Corp said yesterday that third-quarter sales will fall to US$8 billion to US$8.4 billion, while analysts expected US$9.3 billion.
"Businesses are not spending on technology, consumers are not spending on PCs or printers and the global slowdown is spreading," David Katz, chief investment officer at Hewlett-Packard shareholder Matrix Asset Advisors Inc, said.
"That's a very short-term picture. Longer term, H-P is a leading player."
The total sales decline includes a 3 percent drop from converting foreign currencies to US dollars. Worldwide outsourcing revenue will rise 20 percent, and consulting sales will rise 9 percent.
Today's forecast marks the third consecutive period that Fiorina has been forced to lower her targets mid-quarter.
In the fourth quarter ended last October, the company missed profit forecasts by US$0.10 a share.
The company's shares have declined 24 percent this year.
Lexmark International Inc on Monday said second-half earnings will miss expectations, with third-quarter profit of US$0.50 to US$0.60 a share and fourth-quarter profit of US$0.70 to US$0.80 cents. Profit was expected to be US$0.68 in the third quarter and US$0.83 in the fourth quarter, according to First Call.
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