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  1. Technology
September 15, 1998


By CBR Staff Writer

Hewlett-Packard Co expects to take a one-time charge of $150m in its fiscal fourth quarter associated with cost-cutting initiatives, according to a regulatory filing submitted to The Securities and Exchange Commission. The charges will primarily impact cost of sales, and to a lesser extent, operating expenses, the Palo Alto-based company said. In its quarterly 10-Q statement, HP revealed that revenues were hit by continuing declines in average selling prices and a shift toward the low end in its PC business. Growth was further stunted by ongoing weakness in the Asian markets, particularly in the test and measurement business and through unfavorable fluctuations in foreign exchange rates. As a result, HP said actions designed to reduce costs and expenses are currently underway throughout the company in order to achieve more competitive cost and expense structures going forward. Details of the actions have yet to be divulged but it will most likely involve incentives being offered to employees for voluntary separation. The news comes at a time when some analysts have shown signs of disenchantment with the company’s performance, with earnings this year down or even quarter-by-quarter when compared to last year. Wall Street has increasingly voiced concern over the growing proportion of interest income finding its way into the company’s bottom line – $100m in the third quarter, or 16% of its net income, up from 11% in the preceding quarter. This trend signals that the earnings from the company’s operations are shrinking and it is relying on its cash reserves to bolster profits. HP’s share price has declined with its fortunes this year, falling roughly 40% from last November’s level of just over $70. Still, the bulls slightly outweigh the bears, with the average recommendation on the Street being a moderate buy. It would seem that many who follow the company feel the bottom of the current downturn has already been realized. HP is expected to post earnings of $0.75 per share for the fourth quarter – dead even with the year-ago period – according to analysts surveyed by First Call. Its shares closed at $51.75 Tuesday, up $0.9375 on the day.

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