HP sees slowdown spreading to Europe

By : |April 24, 2001 0

Santosh Menon

NEW DELHI: The head of computer and printer maker Hewlett-Packard Co. said on Tuesday that the US economic slowdown may be starting to hit Europe. Consumer spending on IT and capital spending was slowing in Europe, HP’s chairman and chief executive Carly Fiorina, on a visit to India, told reporters.

"We happen to be the largest consumer IT firm in the world and see consumer trends ahead of many of our competitors." The company saw a slowdown in consumer IT spending first in the United States followed by perhaps a subtle but clear slowdown in capital spending, she added.

“We’re concerned that we’re beginning to see the same pattern in Europe. Consumer IT spending has clearly slowed and we think there’s a slight but definitely noticeable slowdown in capital spending as well,” Fiorina said. HP is one of many US-based technology giants hit by the slowdown. The firm warned last week third-quarter revenues would be flat but said margins would trend up during the same quarter.

Fiorina said she did not expect the US situation to improve until the start of 2002. “Our sense is we’ve reached bottom, that is to say it will not get any worse. But it will not get any better for a couple of more quarters. I think we’re talking about a recovery perhaps in the beginning of 2002,” she said.

Trebling Indian workforce

Fiorina said HP planned to triple its workforce in India over the next few years and set up three research laboratories. “We plan to increase our sales presence, software operations, back-office operations for HP’s internal accounting functions and manufacturing capabilities,” she said.

“We’re also making significant investments in the IT consulting and professional services arena here in India. All totaled, our current force of about 1,500 employees would expand to 5,000 employees over the next several years.” HP plans to site two research labs, aimed at developing information technology solutions for emerging economies, in India’s technology capital of Bangalore and the third in Chennai (Madras).

One of the two Bangalore labs will be set up in HP’s software operations and the other will be on the campus of the Bangalore-based Indian Institute of Science, a leading institute by year-end. The third lab will open this summer at the Indian Institute of Technology in Madras, the company said.

“Just as it’s important for CEOs to think about where technology is going five years from now, it’s also important for CEOs and their teams to think about where markets are going five years from now,” Fiorina said. “The labs will initially focus on economically and culturally appropriate technologies, language localization and connectivity solutions in India with an intent to broaden the reach to other developing nations,” a company statement said.

It said the labs would employ sociologists and economists to work alongside computer scientists to develop these solutions. Fiorina forecast India would gain from the US slowdown as cost-cutting forced firms to farm out work. India stood to benefit as it offered quality talent at cheaper cost, she said.

“What happens to firms in tough times is they become far more creative and a lot more determined about how to make key decisions in a way that sustains quality at lower costs. I think that’s good for India,” she said. “I can’t envision a situation where the economic downturn over the medium term would be bad for India,” she said, adding HP had moved a part of its back-office processing work to India.

(C) Reuters Limited 2001.

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