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HP Updates Guidance, Will Slash 6,000 Jobs

Press release from the issuing company

PALO ALTO, Calif.- July 26, 2001--Based on deteriorating global economic conditions and related weakness in technology spending, particularly in the consumer sector, Hewlett-Packard Company today announced it expects to report a revenue decline of 14% to 16% year over year for its fiscal third quarter ending July 31, 2001, including a 3% negative currency impact. "Economies around the world continue to weaken as we move through the quarter,'' said Carly Fiorina, HP chairman and chief executive officer. "Our consumer business is being particularly hard hit with revenues expected to be down 24%. On the other hand, our outsourcing and consulting businesses are expected to grow 20% and 9%, respectively, in U.S. dollars, 25% and 15% in constant currency; and our support business is expected to post gains of 4% in U.S. dollars and 9% in constant currency.'' Due to competitive pricing pressures and weak volume, gross margins are now expected to be in the 25.0% to 25.5% range. "We continue to take decisive actions to improve our cost structure by simplifying our organizational model, prioritizing strategic investments, and retaining the right skills base for the future,'' said Fiorina. "For this reason, we plan to eliminate approximately 6,000 additional jobs, with a majority of the cuts occurring during the fourth quarter. This will result in a savings of about $500 million annually. These reductions are incremental to the actions we've already taken in the areas of marketing restructuring and management span of control and do not include the impact of outsourcing and divestiture decisions. "At the same time, we continue to make important strategic choices. During the quarter, we completed the sale of Verifone and announced our intent to acquire Comdisco's business continuity services business and StorageApps Inc.'' HP also has taken additional short-term actions to control expenses. One example is a voluntary payroll savings program implemented during the third quarter. More than 80,000 HP employees signed up and a savings of approximately $130 million is expected for the remainder of the fiscal year. As a result of this and other expense control measures, HP expects expenses to be down 2% to 4% sequentially.