My only question now: Is it too late to short?
Posted on 09/25/2002 5:11:03 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
SAN FRANCISCO (Reuters) - No. 1 personal computer and printer maker Hewlett-Packard Co. on Wednesday said it would cut 1,800 more jobs on top of the 15,000 layoffs announced after its merger with Compaq.
The additional job cuts, in response to a prolonged slowdown in the technology industry, would be split between HP and Compaq employees, the company said. HP had originally planned to cut 15,000 jobs by the end of October 2003.
The projected job losses total about 11 percent of the combined work force of the two companies, which merged in May after a bitter proxy battle.
In a memo to employees on Tuesday, HP executives said the new layoffs were the result of a "continued market slowdown and HP's clear intent to have a competitive, world-class cost structure."
Executives and analysts have said the $18.7 billion merger was largely predicated on job and cost cuts which will let HP boost profits as it takes advantage of economies of scale.
Chief Executive Carly Fiorina, who overcame some heavy shareholder opposition to clinch the Compaq deal, told customers at a conference in Los Angeles that the technology industry was maturing and that big, low-cost vendors will take the day.
The combined company had 150,000 employees in May, but HP said in a statement that market dynamics had changed since then, "in particular, the slowdown in enterprise IT (information technology) spending which is persisting six to 18 months longer than previously estimated by most economists."
However, HP said it is hiring in its profitable services and printing divisions. The personal computer and high-end computing divisions are currently losing money.
The new cuts were no surprise to many HP watchers.
"They telegraphed that they may be able to accelerate some of the cost cutting, and that is the main reason we continue to like the stock," said Joe Cuenco, a technology analyst at Fremont Investment Advisors, which holds HP shares.
The Compaq side of the organization will be cut by 8,600 employees, and the HP side will be reduced by 8,200, HP said in a Securities and Exchange Commission filing made Sept. 13.
HP has said it plans on cutting 10,000 jobs by Oct. 31, 2002. About 6,500 people had been laid off by late August.
Shares of HP rose 55 cents, about 5 percent, to close at $12.84 on the New York Stock Exchange. Both the Dow Jones industrial average and the Nasdaq Composite index closer higher on Wednesday.
HP shares have fallen about 45 percent since plans for the Compaq deal were announced about 13 months ago. The American Stock Exchange computer hardware index lost about 35 percent over that time.
Some Wall Street analysts, concerned that HP may not be able to squeeze as much productivity from the merger as planned, are still neutral on the stock, while backers point to historically cheap valuations for HP as a reason for bullishness.
My only question now: Is it too late to short?
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