The slowdown in the Internet economy is beginning to hit Silicon Valley heavyweights like Sun Microsystems and Hewlett-Packard.

Following Steve Ballmer's call for thrift at Microsoft, Scott McNealy is looking to do a bit of belt tightening.

In a leaked memo, obtained by Reuters, the Sun chief executive told employees: "We will have to adjust. We will have to respond to changing economic situations in our spending and hiring decisions. As the market sorts out its economic uncertainty, we will need to continue the cost controls we put in place this quarter,"

Despite this McNeally claimed that Sun was still "storming the market" and refuted rumours that Sun might delay delivery of servers based on its UltraSparc III chip.

In a separate move, Hewlett-Packard has delayed employee salary raises a by at least three months as a cost-cutting measure which is expected to save it between $100 million to $140 million.

HP is also asking mangers to cut the number of temporary staff they use by 20 per cent and to scale back on off-site meetings, travel expenses and equipment purchases. Our sources also suggest that HP permanent employees will be asked to take five to seven days leave in January.

Such moves are reminiscent of past belt-tightening at HP which including plans to shrink worker's cubicles from eight feet by ten feet to eight by eight. ®

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