updated 01:00 am EST, Sun February 22, 2009
HP pay cuts
HP has followed up its lackluster Q1 financial disclosure with an internal memo announcing pay cuts for all employees, according to WebGuild. CEO Mark Hurd authored the memo, explaining that the company had to compensate for poor performance in several areas due to the ongoing economic recession. HP's desktop sales were hit particularly hard, with a revenue decline of 25 percent compared to the last quarter, while notebook sales were down 13 percent.
The reduced pay will start from the top, with Hurd losing 20 percent and the Executive Council members facing a 15 percent cut. The remaining executives will see a pay reduction of 10 percent, while base pay for exempt employees will be cut by five percent and non-exempt employees will only see a 2.5 percent drop.
"To give you a little insight into my world, after we report our earnings, we engage in a dialogue with analysts and investors. They’re going to ask what we’re doing in light of the current environment to right-size these businesses," Hurd said. He further explained that he considers the company "fundamentally sound" and that a company-wide workforce reduction is not the best solution for the current situation.
The recession has affected a number of tech-industry giants. Intel recently announced plans to halt production at five facilities, potentially affecting 6,000 workers. AMD is set to cut 1,100 jobs, while also lowering the pay of remaining employees. Microsoft plans to reduce its workforce by 5,000 employees, while Motorola is expected to lay off 7,000 workers.
"Again, there are no guarantees. If the environment gets worse, if the downturn lasts longer than we’re assuming, if our performance declines, we’ll have to reassess," Hurd said. "But for now I believe this is the right thing for the strength of HP."