Don’t cry for Hurd, Hewlett-Packard; CEO’s pay cut 20% amid sales slowdown

hp-logo-blue1If 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.

 

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  • cjsks

    I am an EDS/HP employee. We offically became HP employees on January 1, 2009 and I can now honestly say that the acquisition has been completely to the detriment of my co-workers and I. This is the fifth acquisition I have experienced in my career and it is by far the worst. EDS is now carrying HP on it’s back in every way.

    On February 18, 2009, HP CEO Mark Hurd announced in a memo to all HP staff that “EDS and TS — had a strong quarter, delivering virtually all of the local currency revenue growth and more operating profit than any other line of business…”

    In fact EDS was HP’s only profitable business last quarter. All other lines of business suffered double-digit percentage loses. So naturally, the victim of HP’s latest cost cutting measure was… EDS?? What happened to HP’s so-called “pay-for-performance strategy”? HP is actually penalizing performance, and therefore using EDS to subsidize loses company wide on both sides of the balance sheet.

    What’s more astounding is that in recent months/weeks, EDS has been winning new business left, right, and center. So why at this very key moment in time, when we are preparing to deliver on these new contracts to the best of our capabilities, does HP bite, beat, and kick the hand that feeds them? We are already more thinly staffed than ever due to layoffs late last year in preparation for this acquistion, our comp and benefits have been gutted, and we are consequently more demoralized than ever. It all seems very counter-intuitive to every sound managerial strategy taught and I don’t see this move as beneficial to the company in the long run. The best and brightest of HP/EDS are all too human and many have reached their breaking point.

    Meanwhile Hurd is coming off a $42 million year in gross earnings. He made a “heroic” claim to a self-inflicted 20% paycut in February, which as it turns out, only applies to his base annual salary of $1.5 million; 0.7% of his total comp. To me, an accumulated 15% pay cut, is a 15% pay cut, and I have no reason to believe that the latest 10% is only “temporary”. There is no faith.

    Interestingly Europe, the other center of the EDS work force, has laws in place that require HP to acquire voluntary employee sign-off on any pay rate decrease. Naturally, the European work force is holding it’s own. Americans do not have this luxury.

    Today, the major news networks are reporting and commenting extensively on the AIG “firestorm”, this HP act is a similar travesty, another shameless greed inspired manuever by America’s executive elite, using the veil of the economic crisis, and there are probably endless similar examples occuring at this moment in every corner and in every shadow of our society. It is truly beginning to look and feel like a war of the classes, the Corporate Fat Cat vs. the Everyday American, and it isn’t looking good. Not sure even Obama can help…

  • fedup

    Hurd is licking his chops. HP has been bled dry, so he acquired EDS to rob them to continue his bonus frenzy. Is the board that greedy and thoughtless to not understand what is happening to the company. ANd pay cuts for the month of April? How obvious is that. Long term investors should run away — FAST! Well, I guess the employees should too!

  • Maverickjames

    Don’t forget the constant progression … Cut/stopped pension contributions, and that will be replaced by an increased 401K contribution, then 3 weeks into that, another notice, Oh yeh, we decided that your 401K is now a Crap shoot .. we may, or may not contribute depending on how we feel (oops perform) this quarter …. then an annual salary cut, a couple weeks later .. a one month salary cut on top of that …. (look at the progression) who believes that one? And don’t forget, those of us that work on those international multi country jobs, are now being asked to travel (it doesn’t matter how many hours, in economy class … 10 hours and more) … while exec fly on their private jet …. My contribution per month, without accounting for the pension, 401K, equals my house payment!

  • EDSers – You are the profit center

    Unlike printer ink – you have a brain. Stop whining and use it!

    SLA’s.
    Time and Material Billing.
    Sick Days.

    Like Eazor said… “If everybody does their part” ;-)

  • EDSER

    @EDSers – You are the profit center

    Totally agree. Say no to the pay cut and get some good legal insurance for when they come to CR you. If they dont consult they will pay heavily.

    Also remember EDS does not exist anymore this is all HP…brush up on TUPE!!!!!

  • Workforce Reduced x HP employee

    Yes great TURD, I worked for the printer division, Mark Turd hates us, he thinks we’re all a bunch of cry baby’s and too old. Mark was brought in to be a hacket man..cut cut cut.. that’s what he did at his last job. He has reduced the spending in the printer departments that now projects are being canceled.. without money for R&D the printer business will slowly go down.. I think (IPG) he will either sell it off or spin it off.. which would be a good thing for the remaining employees.

  • Jackie

    I can’t cry for HP. I bought their lousy 7280 and it didn’t work out of the box. I think because they put in firmware to force people to buy their cartridges. Well, the software was defective. Using their first set of cartridges and then buying another set entirely, the machine never worked. And I couldn’t do anything about it because I didn’t complain quickly enough. Sorry, my dad, one of the first programmers in the US, was dying. I was busy. But curse HP, I hope the whole company crashes. And for sure, all the loser management should go live in the netherworlds.

  • Jackie

    Oh, yes. And while you are all at it…Just start looking for new jobs. When a company becomes so corrupt that it’s sending messages through it’s managers to intimidate it’s workforce, it’s all over. And your manager is a villain (is not your friend) to cooperate.
    In the meantime, you would have to be entirely spiritless people not to figure out ways to have a little economic revenge.
    If HP is cash-cowing it’s name by buying printers from other vendors and reselling them, then remember, it’s easy to start similar off brand printer companies. My huge company doesn’t buy their printers anymore. Another brand came in and made a better deal.
    I wonder if they are going to do what one famous bicycle company did. That company decided it didn’t like unionization and American wages, so it contracted with an overseas manufacturer and had the manufacturer ship the bikes directly to the stores. And in two years the manufacturer offered the stores better deals on a new, competing brand of bikes. They took most of the market.

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  • Aware

    I am simply appalled to read some of the comments left by those (example #28) who see any kind of reason behind Mark Hurd’s logic. Have those of you who support him have been reading, reading at all? People are being thrown to the wolves, people with children, individuals who are considered to be too old to find another job that will hire them, people that in a matter of months will lose it all, HAVE YOU HURD SUPPORTERS HAVE BEEN READING?!?!?!?!?!?!?!?!

    Hurd made 42.4M, let me say that again 42.4M last year. I did the math and top management took 211M from the company in 2008. If anyone of these demons I am trying to my best not to lose my senses would take $0.00 for the next year, which if they have been making those kind of $$ for several years now, they definitely could, would you imagine the # of jobs that can be saved. Can you fathom how far it would go with HP employees in the way of appreciation, loyalty, and renewed passion for what once was HP?

    The disparity just keeps growing and growing, the greed keeps on taking and taking, and I do not see a stop to it anytime soon, why? Simple answer HOW CAN THEY RELATE TO OUR challenges when their financial means are so far above ours, how can they? They cannot and because of this they will continue to step on people time and time again so that they can keep their precious bonuses and disgusting salaries. I propose that with every bonus a picture of all of the families that will pay with losing their jobs be attached to the check and sent to them. Then I propose that they would have to personally jump in their limo or jet and travel to meet the families affected, and explain to them why. Furthermore I propose that when these families find themselves in the streets of moving to poor and dangerous neighborhoods that Mark and his herd accompany them through their journey into misery, eat what they eat, sleep where they sleep, etc.

    It is the only way that top management will ever even get a sliver of a glimpse of what their GREED and selfishness is doing what I know they consider minions. Do not mistake me for not having work for the company, I did for HP when HP was HP, then I worked for Agilent so I know all about WFM’s, excellent review in the midst of pay cuts, bonuses for top management, etc. I HATE WHAT HP has become, especially when I remember what HP used to be not too many years ago.

  • Brad

    I stopped purchasing HP products… May the management at HP learn how to be managers and leaders, not bleeders of employees and customers.

  • Guibo

    “Take the package and run, I just had dinner with Mark Hurd last night, he is a numbers guy.” 1 month before Lew Platt passed away while at Chevy’s Restaurant in RWC, CA, I saw him in the parking lot, so I yelled Lew! He made a 90% turn and came straight towards me. So I told him about the early retirement package I was offered in 2005, the above was his response.

    So I did…

  • chatto

    All the whining made good reading. This is my take on it -

    1> Hurd has all the right to run his company as he pleases,
    if you don’t like it find another job

    2> Don’t blame the people in India and China for taking away your jobs,
    they don’t end up working for gods, they are very much in the same
    situation that you are in.. sorry had to break this mould.

  • Fooltostay

    Hey Chatto – Turd does not own the company – he just runs it in behalf of shareholders and his own selfish motives. So, let him retain the monkeys and fools that stay – Turd be gone with the rest. Yes, the folks in India and China are in the same boat as the US – they no longer are willing to work for low wages. Think HP is seeking workers in more remote tribes now. HP is slashing job grades and moving EDS US jobs into those low pay grades so that everyone is making the same low salary. Think we are at par with India and China. As a certified project manager, I am going from $80K to $60K – so they can give me a lower severence. I generate and close new business, manage client, manage engineering resources, work and schedules, order hardware, manage installations, and solve problems for several projects at a time. I am working so much that I don’t have time for vacation, lost pension, 401K match, have to pay my own office expenses. But, thanks Chatto for the great advise – I was considering sticking it out. I hope the entire work force exits. I am most upset by the “token” EDS puppet leaders that are letting this happen – I can’t wait when Turd “pink slips” them next. EDS services is driven by type A people…I know that I am outa here…You cant even get a decent employee discount on an HP PC. At $60K, I can work for a new company that at least is “honest”.

  • YaddaYadda

    In response to Guibo (#61): I would love to “take the package an run”. So how do i get them to offer me a package? If only we could volunteer to be laid-off, and still get our severence package.

  • Broken Back

    As Technical Support for HP, I’ve never considered myself a member of HP’s executive council, however like many, my total reduction in salary is expected to be in excess of 15%. Either I should be emailing Mr Hurd for a key to the executive bathroom, or Mr Hurd is not being entirely forthcoming to the public or the HP work force about their true cuts. I suspect this has something to do with public and customer perception over a once magnificent company.

    With HP’s continual efforts to maximize market share on the backs of their employees, backs are breaking. First raises, then bonuses, then overtime, then layoffs and now salary reductions masked under the guise of “Economic slowdown”. Where does it end?

    HP has contractual obligations to its clients. If HP can successfully convince their staff to work at a massively reduced salary then HP wins. Many demoralized staff will still fill seats performing their day-to-day for fear of not feeding their children or paying their mortgage.

    I can only describe HP actions as Bulimic. They gorged on companies and then self-induce vomiting. Unfortunately for the shareholders, HP is vomiting away all the expertise until all that remains is a dilapidated skeleton.

    Sincerely,

    A tiny splatter of vomit.

  • Tom

    I got hit by the 5% then the 10% Then I had to make the difference in the 401K they stopped. They trashed our Pension a long time ago. And last week, they told me with a Straight Face that another 17% would be taken. EDS salaries were NEVER competive to begin with. So how did HP come up with these numbers. What are they paying in Mumbai? They are Literally forcing me into Bankruptcy as I cannot pay my Mortgage on this HP pay scale when it goes in Sept 01. I don’t know how this can happen in America, but it did. All those EDS’er who thought this HP thing was a good deal. How do you like it now ? They obviously bought EDS to milk the Pipeline and destroy a Potential Competitor. They sure want to get rid of EDS people and have found the cheapest way to do just that.

  • take the money and run

    Take the Money and run. Who were the fools that sold us out? Rittmeyer? EDS sold the company knowing that HP will get rid of 25000 of us. What a great leadership. Take the money and run.

    Someone needs to let the President know. Oh Wait! He does know. He was approached in Germany by the EDS brothers and sisters there. The Work Council declined to accept the pay cuts. So then HP turned on the US EDS’rs. He knows there is no such laws here.

    I too can’t make my mortgage payments because of a total cut higher than 30%.

  • Guibo

    I did the “Take the Package and Run” because of Lew’s comments to me. I was 51 in 2005 working in IT & been at HP for 31 years and I was not in management, just another worker rated in the middle of the rankings.

    It was worked out for the best, even if it didn’t I have to approach life that way that – things always seem to work out for my family, we are very lucky and fortunate. After taking a bunch of time off I went looking for a job and was hired as a contractor at the same HP rate but a year later I was making 20% more. The next contractor job was paying me 50% more than my HP salary (mind you no benefits but I have medical from HP). Then 3 months later I had verbally acceptable a rate that would have paid me about 90% more than my HP rate. Well that night my wife and I were hit on a sidewalk while walking by a car on Dec 12th. She was ok after 4 months. I am still recovering with many injuries and will still be off work till at least Feb 2010. But is the glass half full or half empty? Well when you should have died from the impact and go flying 40 feet and then that night while in Stanford ICU Trauma and they tell the family because of all the brain bleeding I was not going to make it… the glass is still half full although it really suck what happen and the good things and not so good things I have experienced . But I have to keep thinking positive and that things will work out. My wife had left HP after 28 years and it was her best move as she holds an outstanding job for a local company and makes a very nice salary with many bonus.

    Life goes on and – the next day you need to get on that horse and ride it. I learned that years ago when the Stanford and UCSF docs told my wife she had less than 5 months to live because of her cancer – The world does not stop for me or anyone I learned… And leaving HP can be the right thing too do you just need to have confidence in your abilities and when you start the new job, use good judgment not only when to ask questions, but to who & and if the answers are there on the web sites look them up and gain that knowledge on your own. Just remember, “Things always seem to work out” And they do…

  • Ex-HPer

    I was layed off from HP about 3 years ago after over 20 years of service.

    I spent years ducking layoffs, and working on projects that were considered ‘strategic’ to the business. All this got me was 60+ hours a week to meet unrealistic schedules. I was staying up all night to get my work done, as it was the only time I could get performance out of the system to do my job.

    After a while it became clear to me that I was being exploited. I was killing myself for a certain execs to receive huge bonus, for cutting costs and after I completed my project, there would be no reward, no recognition for a job well done. I would be layed off and Mr. Mott would collect his bonus.

    What got me moving was there were rumors that the severance package was going away. I begged my boss to put my name on the WFR list, which I know he was not supposed to do. My WFR was escalated a couple of times, due to the project I was working on, but finally I got what I wanted the severance package.

    HP people are some of the most loyal people I have met. They give their heart and soul to the company. I have seen this many times. I was one of them. However, I encourage you, be true to yourselves. Things will not change there and it sucks the economy is so bad right now. But there is a much better world out of there. I would avoid high tech, but medical devices and energy startup companies are benefiting from Silcon Valleys talent. Don’t let hp exploit you.

    My heart goes out to all of you, employment by fear is no way to live.

  • ScrewedbyCEOGreed

    The Turd you mention pulled the same crap at NCR (except there he fired 10% and outsourced half of engineering while giving himself a cool million dollar bonus in addition to his board of directors “negotiated” 500 thousand dollar bonus.

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  • Sorry for the inconvenience.

    I am an HP customer. Twenty-five years ago I made the mistake of buying everything HP. The products were good, but the tech service is an absurd joke. Since my wife’s illness became much worse, I now must work from home to care for her. Three years ago went broke attempting to maintain $1610 a month health insurance premiums. We lost our insurance and I now buy Insulin and other meds on Craigslist to keep her alive. I make less than $1000 a month now and the only income I get is from copies I make in my garage. When I call for HP tech support, which is about once a year, I am routed each time to someone in New Delhi who can not speak English clearly enough to be understood. They have no real working knowledge of the products and act like they have only 3 answers on a card and expect me to ask the right 3 questions. I am charged $39.95 and the answers are always for me to, reformat my hard drive, reboot my computer or download the newest printer driver…. or for me to wait on hold for half an hour while they ask their supervisor. When they tell me something I know is wrong and I catch them on it, they say that they are “Sorry for the inconvenience!” I have wasted hundreds of dollars buying parts that were not needed, but when I confront them on it they are, “Sorry for the inconvenience!”. When shipments do not arrive on time, they are , “Sorry for the inconvenience!”. I found this forum site by accident because I was looking to see what HP “tech” help in New Delhi earned for a living. HP executives like Hurd must hate America to send out all the work to idiots who have no knowledge of what they are talking about when we REAL Americans need jobs here. I have never been trained on HP products, but 95% of the time I have more knowledge about fixing a problem than the techs in New Delhi do. I wish I got paid for sitting on my butt and doing nothing to help others. A single issue with a single simple question usually turns out to be 10 to 12 hours on the phone over a period of days or weeks to get an answer. Recently it took over 10 hours to just order a simple drivers disk for a printer…and two weeks later it still has not arrived and no one at HP can tell me where it is or if it really shipped. The ONLY time I ever get anyone at HP who helps is when I get someone in the US to answer the phone. EVERY time I get New Delhi I am told that it is impossible to be switched to the US and they do not have a number for the US. When REAL Americans like you are out of work because some money grubbing executive is making 42 million a year by at your expense by sending all the work to idiots in another country, you are being laid off and your pay checks are being cut, you can rest in the knowledge HP is , “Sorry for the inconvenience!”

  • Happily Dismissed from HP

    Ah, the freedom! After 23 years, my ticket was finally punched and I’m free of the golden handcuffs! It feels so good! Enough working for Turd and getting sh..! I’m through with working for “the man” and I’m ready to be the man!

 
 
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