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HP asks volunteers for pay cuts, days off

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CIOL Bureau
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Peter Henderson and Nicole Volpe

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SAN FRANCISCO: Struggling to meet financial targets, computer maker

Hewlett-Packard Co. is turning to traditions born of the Depression, saying on

Friday it had asked for volunteers to take pay cuts or time off.

Hewlett-Packard's famous "HP way", the community spirit developed

by its founders, is something of a legend in Silicon Valley, spreading out

around HP headquarters in Palo Alto, California. But the cozy workplace

informality has become tinged with senses of entitlement and bureaucracy that

slow HP down in the entrepreneurial rat race of Silicon Valley, some analysts

say.

They fear chief executive Carly Fiorina is walking a thin line between

destroying company culture and "reinventing" the firm as a better

business machine. She and her management has already signed up for the plan,

Hewlett spokesman Dave Berman said.

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"It's a 10 per cent pay cut, or eight paid vacation days," he said.

"We've had a tradition of employees pitching in and doing what they can in

difficult economic times." The vacation would come from days already

accrued, but employees could also take a mix of salary cut and days off. Or they

could ignore the program altogether.

"There is an option to do none of the above, and your manager will never

know, because we are not tracking it to that level," Berman said. Accrued

vacation is a financial liability, and so by taking days owed employees improve

the financial health of the firm. "These are aimed at making our

third-quarter consensus estimates, although obviously these efforts are going to

go through the fourth quarter as well," Berman said.

Network computer maker Sun Microsystems Inc. and Compaq Computer Corp. are

shutting down next week, and computer storage maker Network Appliance Inc. and

Dell Computer Corp. are requiring employees to take some time off this quarter.

All those programs are designed to cut costs in hard times, but only

Hewlett-Packard's is voluntary.

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HP asked employees to take some time off around Christmas last year and in

May asked them to take 6 days vacation by October, the end of the fiscal year,

again voluntarily. Berman declined to say how effective the program was so far,

noting the most recent request was made only a month ago.

Hewlett-Packard has repeatedly lowered financial targets since the economic

downtrend began late last year, and Fiorina said on June 6 that she was more

cautious about third-quarter guidance and would cut costs to try to meet Wall

Street's profit goal, which HP said at the time was 23 cents per share.

Employees would take the pay cut until the end of the fiscal year on October

31, or take the 8 days - perhaps in addition to the previously requested 6 days

- by then. Other cost-cutting measures include tighter cell phone expense limits

and travel policies, Berman said.

(C) Reuters Limited 2001.

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