Hewlett Packard cuts salaries
HP MAY HAVE had an OK quarter, but much of that was because of HP Services, the ex-EDS guys. Other than that, things tanked, so pay cuts all around.
In a memo dated yesterday, Mark Hurd is cutting salaries, and as is the norm nowadays, the deepest cuts are at the top. Mark is getting his pay slashed 20 per cent, with the executive council getting whacked 15 per cent, and other execs 10 per cent. Exempt employees will be cut 5 per cent, the rest 2.5, and other 'cost savings' features like pension plans and stock options. The last two are "unspecified", which means "really huge". All of this is pending legal sillyness of course.
Here is a screenshot of the mail, followed by the full text. We have received multiple copies of the same memo, so we are pretty sure it is legit. Do not read anything into the fact that Ann Livermore has a more ostentatious header, really. Enjoy.
Message from Mark Hurd
February 18, 2009
Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment.
We grew revenue 1 percent year-over-year, or 4 percent in local currency, and you need to look at these numbers a little differently this quarter. For the first time in a long time, the dollar was strengthening, so the currency conversion was actually a headwind for us. We also continued to show strong operating leverage with non-GAAP operating profit up 10 percent year-over-year. This was a solid performance, and I thank all of you for your efforts.
But really, Q1 was like a tale of two companies.
HP Services - as a result of EDS and TS - had a strong quarter, delivering virtually all of the local currency revenue growth and more operating profit than any other business. It's gratifying, because this performance was possible because of the hard work we've been doing to restructure those businesses.
When you take HP services out of the mix, it's a very different picture. PSG had revenue down 19%. ESS had revenue down 18%. IPG had revenue down 19%. In fairness, across IT and even other industries, product businesses are struggling in this economic climate. And we did gain share in key market segments. PSG and ESS gained roughly 1 and 3 points of share, respectively. In IPG, quite frankly, we still have work to do across a number of dimensions like inventory, both owned and channel inventory.
In an environment like this, there's no margin for error and no tolerance for inaction. 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.
The math is pretty straight forward. From a productivity standpoint, you're supposed to reduce headcount on par with declining revenue. If you believe the environment isn't going to improve, you should take a bigger cut to get in front of the problems. You can do the calculation, as easy as I can. We have about 100,000 people in our product businesses, with revenue down roughly 20%, and an environment that may not get any better in 2009.
I'll be asked by investors, "Where's the job action, where are you taking out this roughly, 20,000 positions?" Well, I don't want to do that. When I look at HP, I don't see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don't believe a major workforce reduction is the best thing for HP at this time.
I think we are fundamentally sound, and when the economy picks up, I want HP to be strong, and to take share and to outgrow the market. I said it last quarter, my goal is to keep the muscle of this organization intact. But we do have to do something...because the numbers just don't add up and we need to have the flexibility to make the right long-term investments for HP.
So we are going to take action. We have decided to further variablize our cost structure by reducing base pay and some benefits across HP. My base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent. The base pay of other executives will be reduced by 10 percent. The base pay of all other exempt employees will be reduced by 5 percent. For non-exempt employees, base pay will be reduced by two-and-a-half percent. Additional efficiencies, including changes to the US 401(k) plan and the share ownership plan, will also be implemented. Of course, the implementation of all of these actions is subject to compliance with local laws and regulations. Follow-up communications will detail the timing and the plans in your location.
This does not change our pay-for-performance strategy at HP. If we outperform, and there is a chance we will, then we will increase the total amount of variable pay. In fact, the financial flexibility we're gaining helps put us in a better position to compete and to win in the marketplace, and fund the bonus program this year based on pre-adjusted salaries. If the company performs well, if our individual businesses perform well and if you perform well, then you could potentially make up the difference with your bonus. I can't promise you anything, but I tell you...there is a chance...if we get this right.
To be clear, these actions don't make up for all of the decline in revenues. We're also benefiting from the tough actions we've taken over the last few years. People always asked, "Why are we so focused on getting costs out in good times?" Now...is why that work was so important. We've been able to bank some of those savings, and we're making a withdrawal, which along with the actions we're taking today, I hope, will get us through this recession.
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. But for now I believe this is the right thing for the strength of HP.
I know this is a tough time. But if we get this right, HP can be the kind of company that not only has led, but will extend its leadership. We can emerge from this recession in a powerful position to create value for our customers, our shareholders and our people for years to come.
Thank you.
Mark
[End Memo]
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Thank god they cut our pay so we can keep our jobs. Oh wait, that is no guarantee. I am now making less than when I was originally hired. I'm in Software and Services and we have an 80% profit margin but being grouped with the Printing division negates any performance we achieve. Bullsh!t. That is a great way to avoid performance based bonuses. Lump them with other divisions and it is nearly impossible for all them to perform well at the same time.
Oh and as far as 401k, that 4% doesn't really mean 4%. If my division underperforms, we may see 60% of that 4% match.
Just wonderful news all around. There are a bunch of 5% jokes flying around the cubicles today. We had a meeting and someone walked in late. It's okay, you were 5% late so no problem. Guess that's all we can do is laugh.
I'm tired of the "at least we get to keep our jobs". I think corporations are taking advantage of this economic climate and again, there is no guarantee we get to keep our jobs. Where is a paper I can sign that taking a cut in pay I can guarantee my job for X years?
Also, there was no mention of whether this cut was temporary...
Cutting your base salary Mark? What the fuck happens to your stock options, dividends, bonuses with this change, etc because of these cuts?
Guess formatting does not stay in posts since it is now a blob of sentences. Also, my subject line was cut off. It should have read "It blows....but we get to keep our jobs <middle .
Tell this rich crook Hurd to go visit a homeless shelter or go visit a 6 year old in a cancer ward. Tell these corporate puppets to get some perspective in life and stop treating the average worker as a disposable commodity. Jesus, these mouthpieces are a disgrace to humanity.
Mr. Drew's comment is frankly shortsighted at best. boohoo his division made money while the printer pukes did not. Lets ignore the many years when HP service couldn't make a sandwich and the ink geeks paid for them. I worked for HP for 10 years and the ink pushers paid for everything. Sharing the pain is fair and reasonable.
I agree totally. When one portion of a big company is doing well, they think it's unfair that everyone else gets to ride the positives of that wave, yet when their division is doing poorly, they would never think that they should bear the repercussions alone.
I do agree with the thought that many companies are using the tough economic times as an excuse to cut back even when they do not need to, but that being said, listening to someone who has to take a paycut, but still gets a cheque bitch about it makes me sad when so many other people have nothing.
Imagine, he is cutting his base salary a whole 20% while ravaging his workers a full 15%? Fair you say. Well, his "base salary" is about 10% of his total compensation package. So while he is cutting his workers - who produce the money - by 15% he is taking a huge 2% (approx) hit. What a guy. He really believes he is the source of HP's income?
is probably more than what 90% of the underlings make all year. He gets a 20% pay cut he aint starving a 5% pay cut for me even in the middle levels would take back all the raises Ive gotten the last two years even when times were good... i think he has every right to be upset as hell. I know I would be, you did a great job heres your 3% raise while the cost of living went up 10% enjoy. Screw these aholes they could usually save more money in things like getting rid of the 20 millions dollar jet.
Just think 20% 0f $1.4M, %280K, Total compensation for 2008: $42.5M - 0.68% decrease in his take.
Mark, How about you take no Bonus or stock grants for fiscal year 2009?
Didn't think so...
I wish the company I worked at until last month would have given me that option. I walked in and was laid off. I had great reviews, ran the site I was responsible for above expectation. We had a 30% lay off, I offered to work 20 hours a week so I could meet my minimum bills, but no dice.
Wish I worked for HP, I'd still have a job and know where my next meal is coming from.
I'm looking at starting my own small IT biz back up, but I see a lot of people doing that, and at super cheep rates too. Taxes taxes, I need a job.
I work in HP services in the UK , have done for over 20 years. My base salary is the same as it was in 2000 , myself and some of my colleagues have had no raise (at all) . Now the want us to take a pay cut !! By my calculations (just with inflation) our slaries are already 25% down anyway. I'm not going to even go into the fact the allowance I get to run a car to do my job doesn' actually cover a car anymore , as that has not gone up either !!!!!!
Sax, you have no clue. I was not with HP during the whole 10 years you speak of. My company Peregrine was acquired only a couple years back. Our support brought that company out of the hole they had dug for themself earlier before we were a twinkle in HPs eye. Also, who was to say I didn't think PSG should be its own division. Combining several different departments so you can always point the finger at the low-performing group when bonuses are lacking is a corporate trick to screw the little man. I would be glad if your division was completely separate and you "didn't have to carry the rest of us". You're an idiot.
Dick, sorry for bitching and paying for your unemployment benefits. You just keep on agreeing with your corporate masters so they may continue to screw you over. The excuse "you are lucky to have a job" is bandied about too much and does nothing more than provide more avenues for executives to control your life. It makes me sad when stupid fucks don't realize we have so much more in the way of support compared to the Depression of the 30s. So please Dick, continue to bitch that you or others have no paycheck but have unemployment benefits, welfare, food stamps, etc that did not exist in other rough economic times.
You should be glad I'm still getting a check and rooting I get a higher salary so I can pay even more of your benefits while you look for work. Another idiot. Paying less to workers who turn you a consistent profit isn't helping anyone in the long run. We need to reverse the contraction of the economy you moron not contribute to it.
Sorry Vinster but you are running under a huge misconception that my job is safe. HP already planned long to eventually replace my group in Costa Rica but surprise, my product is not easy to support. Since there stock still took a hit regardless of the news combined with the emails we received, I have absolutely ZERO guarantee I will have a job next, two months from now, etc, even though I took a pay cut.
Let me say it again because it makes taking a pay cut so much more fun. THERE IS NO GUARANTEE HP WILL NOT CUT FURTHER JOBS BECAUSE WE TOOK A PAY CUT. Ask dingus above or Sax or whatever his name is. His printing group is getting hit with layoffs regardless of the pay cuts.
Keep wishing but it would be better if you took action instead.
... here's the cheese to go with it.
http://www.whomovedmycheese.com/
Drew, did I say I don't have a job? I live in Canada, and while we were hurt by the stupidity of Americans and what they have done to the global economy, I still have a good management position, and benefits and so on. I never said I didn't. So maybe you shouldn't just make up details in your own mind before you call people "stupid fucks".
And yes the support systems out there are better than they used to be, but if you think welfare and food stamps are so great, try living on them for a bit and see if it's that wonderful. And just in case you're as dumb as you sound, I'l reiterate that I have a job, and my job is very safe, so I am not whining about MY situation, I'm just not an arrogant prick who doesn't care about people worse off than me.
If you have to take a pay cut so other people can keep a job, I have no compassion for you. I just hope your department gets the axe next so you can deal with pricks like you not having any sympathy towards them.
For anyone in the UK in the 40% tax band, that 5% cut isn't going to hurt, unless you are massively overcommitted. It will hurt people who get paid less. But for both groups: less pain than being made redundant.
As others have noted, it doesn't mean you wont get made redundant, your app support team moved to Bangalore, etc. And when that happens, 5% less redundancy money, if you are on final salary pension, 5% less of that too. So, for those people who do end up redundant while the cut is in place -it's going to hurt more.
The other thing, nobody says this is temporary. Apparently that's because nobody knows when to put an end date, but at the same time, when the economy recovers, will the money come back? For everyone? I doubt it
Canadians are so arrogant and yet so uneducated. Get the facts straight Dick. You rely on us Americans. If you think we are stupid then stop buying our products, stop watching our television. Just STOP. We don't need you pompous arrogant carbuncles of humanity lecturing us on how wonderful Canada is and how superior your intellect is. We deal with you Canadians all the time. While it would be the height of arrogance for me to say all Canadians are arrogant buffoons like you, in my experience a large percentage of you are. You are the armpit of the UK and you eat the poop of America. As far as your statement “I'm just not an arrogant prick who doesn't care about people worse off than me.” Do you not realize how you totally contradict that by saying “I just hope your department gets the axe next so you can deal with pricks like you not having any sympathy towards them”
Be careful what you wish for Dick. Karma may decide you are axed next. You prove that you truly are not as compassionate as you pretend to be. Just keep your self up there in the great white north and don't visit our "stupid" country, eh. you arrogant hoser.
from Dick:
"I'm just not an arrogant prick who doesn't care about people worse off than me...I just hope your department gets the axe next so you can deal with pricks like you not having any sympathy towards them."
Yes Dick, you are soooo compassionate. I didn't see any arrogance in your Canadian comments either. </sarcasm
Let me write a simple expression for you:
$angrywPayCut~="no compassion for people without jobs"
I won't comment on all of Canada since I do not know that area but I will still comment you are a stupid fuck. Why don't read and comprehend what you post before clicking the Submit Comment button.
even though its still going to be affected.
Look at Construction, they're fubar'd. No one is building, reposessions are up 100%, those guys have nothing.
If you have a job for the next 5 years and it's enough to pay your bills, maybe have 1 holiday a year, and keep things going for you, then you will be one of the lucky ones.
260mil people will be sacked this year. That's 712,328 people will be sacked every day this year.
712,328 people were sacked today. Just to put it in perspective.
Wow, you guys just proved that much like the majority of the American population, you lack basic reading comprehension skills. I said Drew was being a prick with no compassion for people less fortunate than him. Then I said that I hope someday he is in the same position as the people he is showing no compassion towards, so maybe he can learn a little humility. How does that display a lack of compassion in me? I feel for all the people who are not as fortunate as I have been through this all. Hoping that Drew has to go through hard times to learn a lesson does not mean I don't have compassion, it means I wish bad things for Drew, get it straight.
The way you chose to read it would be equivalent to me saying that I wish a murderer would get punished for his crimes somehow means that I have no compassion for his victims. No, it's the murderer I feel no compassion for.
It's nice when you insult ignorant people, and then the prove just how ignorant they really are. Thanks guys!
Oh, and Concerned Engineer, I never said I worked for HP, so just like your American friend Drew, you apparently also cannot read.
Wow Dick, you just proved that you lack basic writing comprehension skills with this: “It's nice when you insult ignorant people, and then the prove just how ignorant they really are.” WHAT?????
Maybe there is some weird Canadian lingo I do not know about where that makes sense but here in the real English speaking and writing world that sentence is evidence of a lack of intelligence.
I read your words in context and I stand by my accurate assessment of them. What audacity to try to explain it all away by foolishly making an analogy of this guy Drew with a Murderer. These things you type, are they supposed to be your Extra superior masterful Canadian intellect that you are putting on display for us? And then you say “I wish bad things for Drew”. You really have a thin skin. Your ego must have gotten bruised pretty bad, huh little man?
I find it interesting that you did not take offense at being called a carbuncle or UK’s armpit but you chose to try to exonerate yourself. Must be that I am right on the mark about you Dick. Thou does protest too much. Now go back to smoking your crack, or meth or whatever drugs it is you are taking you guff jawed, doughnut eating, land raping, sentence murdering, pipsqueak of a human.
Guys, I don´t think this is the appropriate place for personal insults and for handling differences between US Americans and Canadians !
It´s still the place for comments about HP cutting salaries. This is too serious for many involved people !
The "it could be worse..." attitude helps only HP´s HR. Years ago HP employees accepted a 10% cut with the promise not to have layoffs, they still came a short time afterwards. It is therefore a matter of trust too...
HP/Compaq has been short-changing employees for years on pay raises and bonuses. For many people, this 5% paycut (surely not to be the first) totally negates years of minuscule/non-existent pay raises. So, for many they're busted back to the last millennium and its no guarantee that HP will not be coming back with layoffs - stealth layoffs with no warnings that they're coming.
The entire HR system at HP is rigged against the individual contributor. What a tribute to "The Garage".
This 5% cut will save HP $$$ on future WFRs too.
It sucks when people have to give up some of the wealth that they had earned, and big time. I feel sorry for those affected and don't intend to pour fuel on the fire by making adverse comment.
However, it is probably a fact of life that the IT industry has grown rich and prospered over the last couple of decades. So is what we are witnessing now a possible levelling out of the playing field? I don't know, but it would be a shame if people who are affected thought in terms of things being able to go upwards and to the right forever.
There are plenty of negative comments taking place, understandably so, but what else should Hurd et al do?
I just realized something. The Nobel Prize nowadays has a value of 10,000,000 Swedish Crowns, or 1,118,000 US$. Mister CEO Mark Hurd cashed salary and bonuses for a total of 42,500,000 US$ last year. Did he find a cure for cancer? Has he done anything useful for humanity? No, he asks his employees to accept a pay cut of 2,5-5%. These kind of men are nothing more than greedy pigs. They have no morality. They will survive this crisis without problems. What's a million more of less to them? Pigs. Greedy pigs.
Maybe INQ could publish this URL and let the rest of the world and maybe Hurd to see what his employee's think about corp greed.
http://www.damiansaunders.net/2009/02/26/commentary/hp-pay-cuts-an-unfair-act-of-economic-opportunism-and-greed/