Consumer slowdown forces HP to axe 3,000 jobs
Weak sales starting to affect Europe
Hewlett-Packard has announced plans to axe 3,000 management jobs as part of a plan to cut its costs in the face of declining PC and printer sales.
News of the job cuts came when HP today issued its second profit warning this year, which stated that a decline in consumer spending means revenues for its second quarter will be between 2 and 4 per cent less than the same period last year.
The computer giant said the decline in consumer spending first noticed in the US is spreading to Europe, because of which it now expects earnings per share to be in the range of 13 to 17 cents for the quarter ending on April 30. This estimate includes provision for $150 million of one-time inventory and capacity write-downs connected with some of its consumer products.
"It is quite clear that the US downturn in the consumer market is now spreading to other regions, notably Europe," said Carly Fiorina, HP's chief executive, who said that adverse currency movements will also affect the company's bottom line.
Fiorina said that recent market data indicates "growing softness in the retail sector and increasingly competitive pricing moves" in the European PC market, something that may spell trouble for HP's competitors as well as the printer giant itself.
There has been a slight improvement in HP's sales to its business customers, but these are more than offset by its decline in consumer sales.
HP believes that weak demand will run into its third and will result in revenues remaining flat despite an increase in gross margins.
It not yet clear where the job cuts will fall but the one piece of good news for the firm's remaining staffers is that salary increases that were deferred for 90 days after the firm's last profit warning in January will now be paid out. That said staff would still be expected to take days off and trim discretionary spending in order to help HP save money. ®