If job anxiety has a sound, it just got louder in Silicon Valley today when its largest company reported an unexpectedly dramatic slowdown in sales for its fiscal 2009 first quarter. One result is that the company is “reducing base pay and certain benefits across the company” beginning this quarter, according to remarks Cathie Lesjak made on the company’s earnings conference call this afternoon.
After the call was over, HP distributed more details of the pay reductions, including a 20 percent cut in base pay for its chief executive, Mark Hurd. Based on the $1.4 million salary he was paid last year, that amounts to a cut of $280,000. That amounts to a rounding error compared with the $42 million Hurd collected in total compensation last year.
Members of HP’s executive council will see their base pay cut 15 percent, with gradually smaller reductions made down to a 2.5 percent cut in the pay of non-exempt wage earners. The company is also capping its 401(k) match at 4 percent and ending the practice of selling shares to employees at a discount in its stock ownership plan.
Those steps, however, are not expected to do the trick on their own. “We need to do something more about our cost structure,” Lesjak is quoted in an interview reported by Bloomberg News. “We’re looking at the first quarter results and saying let’s model that that will continue for the rest of the year.”
One major reason for the decline in sales was a 19 percent drop in revenue from the company’s cash cow, the imaging and printing group. As CEO Hurd put it in the company’s conference call, “when you don’t have a job you’re not printing as much, is typically how it works.”
If you’re in the market for a printer, you might want to pay close attention. Lesjak, in speaking about challenges with inventory in the printing group said, “we need to get that inventory down.”
The company is still generating a whole lot of cash, enough so that it could spend another $1.2 billion buying up 34 million of its shares. Those shares, which lost 21.5 percent of their value in the last quarter, that got even cheaper in after-hours trading: down $1.94, or 5.7 percent, to $32.14 as of 4 p.m., according to data found on Yahoo Finance.