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HP: Apotheker Sounding More & More Like Mark Hurd

Pesky Reality is Starting to Impinge on Leo's Worldview

So let me get this straight with two quarters of disappointing results at HP under his belt CEO Léo Apotheker finds that he needs to "minimize all hiring" because the company's headcount plans are "unaffordable given the pressures on our business."

What a very Mark Hurd thing to say. Goodness me, next thing you know Léo will be regretting his decision to reinstate HP's Hurd-halted wage increases and looking for unpromising things to cut in R&D.

You see, a copy of a memo Apotheker wrote to senior HP staff May 4 - that CFO Cathie Lesjak co-signed - warning them that "we have absolutely no room for profitless revenue or any discretionary expenditures" happened to flutter onto desks at Bloomberg and the Wall Street Journal late Monday.

That's approximately 48 hours ahead of HP posting its second-quarter results, which Léo has already said won't make the mark, suggesting it may be worse than Wall Street has subsequently modeled.

The memo said the current third quarter is going to be "another tough quarter, one in which we will be driving hard for revenue and profit" and that "we must watch every penny. Lesjak and HR EVP Tracy Keough are now "driving a full headcount re-planning process," it said, to reflect "the new realities of the market and our position."

Bloomberg thumbed back through HP's filings to when Apotheker took over as CEO on November 1. HP then had 324,600 people. One would assume there are going to be less. Last week, the All Things Digital blog came by another couple of internal memos indicating that HP's PC unit had instituted a hiring freeze in Asia-Pac/Japan and freeze on operating expenditures, including travel, in EMEA back in mid-March before the close of the first quarter. The blog said it was told other orders "like them went out around the same time in other divisions within HP."

In Q1 HP delivered better-than-expected earnings, up 16%, but its revenues fell short of the mark and it cut back its revenue guidance for this year by $2 billion, casting a shadow over its growth potential.

Apotheker blamed weak consumer PC sales, including issues in China, and soft valued-added services contracts for his poor fiscal first quarter showing and the company's limpness going forward. Both segments came in below HP's projections.

HP earned $1.36, or $2.6 billion, in the January quarter on revenues of $32.3 billion, up 4% year-over-year, but it was expected to make $1.29 on $32.96 billion based on its own projections.

It said it expected revenues of $31.2 billion-$31.6 billion in Q2 against Wall Street expectations of $32.59 billion, and figured it should realize $1.19-$1.21 a share when $1.25 was expected. Wall Street is now expecting $1.21 on $31.5 billion.

Sanford Bernstein analyst Toni Sacconaghi said it was HP's lowest Q2 guidance sequentially in nine years except for the Great Recession of 2009 and that the back half was loaded above any normal range. 

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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