HP's Boise site comes back lean and mean after laying off 1,150

Abstract

A blustery financial storm at Hewlett Packard Co.--the nation's second-largest computer maker--can look like a cloudless, sunny day to a lot of other companies.

A blustery financial storm at Hewlett Packard Co.--the nation's second-largest computer maker--can look like a cloudless, sunny day to a lot of other companies.

And it appears Hewlett Packard Co.'s 4,000-employee Boise facility has weathered the 1996 storm that brought a summer layoff of 1.150 employees at its disbanded Disk Memory Division.

On the local employment scene, HP watchers can expect smooth sailing for the immediate future, according to Boise HP public affairs representative Deanna Dilling.

"We don't anticipate any changes in our employment levels at this time, but obviously that can change with business conditions pretty quickly," Dilling said in early December. "As business conditions change, we'll adapt to whatever we need to do to remain competitive. But no changes at this time have been announced or are anticipated."

While the Boise site was hit with the layoffs announced in July, HP's companywide employment increased from 105,200 through the first quarter to 112.000 by the end of November.

Also, the president of the Palo Alto-Calif.-based computer company expressed mixed optimism at the end of the year despite two consecutive quarters of diminished profits.

HP's annual profit grew from $2.4 billion in fiscal year 1995 to $2.6 billion for the year ended Oct. 31. That compares favorably with HP's 1994 earnings of $1.6 billion.

But to hear HP CEO Lewis Platt tell it after the end of the 1996 fourth quarter, you might think the company is a corporate pauper.

"We're encouraged by the rebound in order growth this quarter, but somewhat disappointed with our earnings," Platt said. "Our disappointment is tempered by the fact that this was a tough comparison with very strong earnings growth in last year's fourth quarter. But we're quite pleased with the substantial reduction in operating expense growth, which shows that we moved quickly to adapt to changing business conditions."

HP is still making the big dollars. It's just growing at a slower rate.

For the company started in a garage in 1938, net revenue rose from $25 billion in 1994 to $31.5 billion the next year to $38.4 billion in 1996.

In the first quarter of fiscal 1996, HP earned $790 million, or $1.50 per share on approximately 526 million shares of common stock and common stock equivalents. That was a jump of 35 cents per share. The company had revenue of $9.3 billion, compared to $7.3 billion for the second quarter of 1995.

The second quarter saw a net revenue increase of 33 percent--from $7.4 to $9.9 billion--and a 24 percent rise in orders. Net earnings hit $723 million.

HP's earnings declined to $425 million in the third 1996 quarter from $576 million in the same 1995 period.

In the fourth quarter, HP's profits fell from 1995's $678 million to $648 million. The company had experienced 42 percent growth in its net earnings in the final quarter of 1995.

Still, Platt expressed optimism about HP's new growth potential for 1997.

"We're encouraged by an improved order growth rate in the fourth quarter and by the steady improvement in our expense structures through the year," he said. "In addition, we've made progress on inventory issues, and most of the profit impact of our decision to exit disk-mechanism manufacturing is now behind us. As we begin the new fiscal year, we see many opportunities across our business."

The third quarter of 1996 downturn was blamed primarily on a $135 million charge connected to the shutdown of the disk memory division, computing to eight cents per share. An additional five-cent loss was attributed to operating losses in the division during that time period.

Platt also cited pricing and competitive pressures as factors that led to a slower third quarter.

The Boise operations took the brunt of the employment losses.

Even so, HP's Boise workers in May received combined profit-sharing checks of $12.2 million. Worldwide, the company handed to its employees more than $313 million in bonus checks.

With the July layoff, HP offered severance packages to many employees and later re-assigned 650 displaced workers to other jobs at the Boise operation.

In some major financial news for investors, HP on May 17 announced a 2-for-1 split of the company's common stock and raised the quarterly dividend by 20 percent. The official date of the seventh stock split in company history was June 19.

It was the first HP split since the one that went into effect March 24, 1995 at a price of $123.

"We want our employees and a wide variety of individual shareholders to hold HP stock," Platt said. "This split will make our stock more accessible to many people."

HP's first stock split was a 3-for-1 split on Sept. 25, 1960, about three years after its first public offering.

The company announced four dividends during 1996, including a quarterly dividend in the summer which increased the dividend on common stock from 20 to 24 cents.

The latest quarterly dividend of 12 cents per share on the company's common stock occurred on Nov. 22. The announcement was simultaneous with the news of the repurchase of $1 billion in HP shares on the open market and the election of Edward W. Barnholt as an executive vice president.

Back at the Boise plant, HP is continuing with capital improvements, Dilling said.

"We'll continue to invest in new technologies, product programs and strong channel partnerships," he said. "So, we'll continue to make all the proper investments in all these areas."

Dilling touted the progress of two LaserJet printers currently being produced at the Boise site--the LaserJet 5si Mopier and the LaserJet (color) 5.

"The printers continue to register good, moderate, overall order growth and the LaserJet supplies are experiencing strong growth." Dilling said. "Those are both Boise-based and very strong areas for us...They all kind of have their own niche. The Mopier is kind of a new vision, though. The trend is a digital work place and with the visions of the digital work place, the Mopier 5 fits in there extremely well."

HP co-founders Dave Packard and Bill Hewlett were among the 600 who attended the company's annual shareholders meeting on Feb. 27 in Cupertino, Calif., where Platt talked about HP's involvement with the infrastructure of the Internet.

"That is clearly going to transform how we work and live," he said, predicting the technology portends, "Vast opportunities and huge challenges for HP and our competitors."

According to company information, Packard and Hewlett--Stanford University graduates--started their work in a Palo Alto garage in 1938 with $538 in working capital. Their first product was a resistance-capacity audio oscillator (HP 200A) an electronic instrument used to test sound equipment.