Below is the memo sent announcing the pay cuts.

From: EDS Worldwide Marketing - Communications
Sent: Friday, March 13, 2009 4:05 PM
Subject: Additional, Temporary Compensation Adjustments for EDS U.S. & Puerto Rico Employees

To EDS Business Unit Employees in the United States and Puerto Rico:

Since becoming part of HP last year, we have accomplished a great deal and should be proud of what we have delivered together. Our service excellence remains high, and we have closed a number of significant deals. Our execution during the transition phase has been outstanding. As we move from the integration phase into the transformation phase, we know from experience with our own client projects this will be the most difficult part of our journey.

Our goal is to transform the business into a future state, which will grow faster than the market and enable us to take share from our competitors. We will then be able to deliver above-industry benchmark returns to our shareholders and price deals that win more business while providing flexibility to invest in innovation, delivering greater value to our clients.

The gap between where we are today and accomplishing our goals is widened by the current economic climate. As a result, we need to take temporary actions to get us through this difficult period. Our customers expect EDS to be a financially strong partner and, as employees, we expect a healthy company as well. With this in mind, we announced specific actions on March 9 to reduce our cost structure and enable the business to improve operating profit and grow as we enter fiscal year 2010.

Unfortunately, we need to take additional action. Specifically, we have decided to make a temporary, additional reduction in base salary affecting EDS business unit employees in the United States and Puerto Rico.

Base salaries for all United States and Puerto Rico employees in the EDS business unit will be temporarily reduced beyond those reductions previously announced by HP on February 18, as follows:

An additional, temporary reduction of 10 percent in base salary effective for April 2009
Base salary will not be reduced for employees below an annualized, full-time equivalent income of $40,000 by this additional, temporary action

In May 2009, base salary for United States and Puerto Rico employees in the EDS business unit will be reinstated to the levels of base salary effective on March 16. This includes reductions previously outlined in HP’s February 18 announcement. While we have no plans for an additional base salary reduction, we will continue to closely monitor the performance of our business and make further adjustments as required in the coming months.

We recognize these are tough actions, and you can be assured we made this decision after much thought and assessment. We ask for your support and understanding as we work through these very difficult times. We are confident we will strengthen our position in a consolidating market. We will be one of the industry’s strongest and safest pairs of hands, trusted by our clients to solve their technology challenges.

Sincerely,

The EDS Senior Leadership Team

Here’s an interesting development to watch.  Compare Cisco’s most recent press release with Cisco’s previous layoff in 2001.

February 27, 2009
Today, Cisco began job cuts as part of a restructuring that could involved up to eliminating 2,000 positions.  However, up to 6,700 positions may be at risk if recession does not lift.

March 9, 2001
Cisco plans to cut up to 8,000 workers due to concerns that the tough US economic environment could spread internationally.

We’ll see if mass layoffs–defined as 10% or greater workforce reduction– can be avoided.

A friend send me an interesting article from Douglas McIntyre, posted on 247wallst.com.  You can read the article for details re: valuation and websites.  Below is the quick summary.

1. Gawker Properties: US$170 million
2. Huffington Post: US$90 million
3. Drudge Report: US$48 million
4. Perez Hilton: US$32 million
5. Sugar, Inc: US$27 million
6. TechCrunch: US$25 million
7. MacRumors: US$21 million
8. SeekingAlpha: US$11 million
9. GigaOm: US$9.5 million
10. Politico: US$8.7 million
11. Smashing Magazine: US$7.7 million
12. SearchEngineLand: US$4.5 million
13. Boing Boing: US$3.6 million
14. ReadWriteWeb: US$3.4 million
15. SB Nation: US$2.7 million
16. Destructoid: US$2.5 million
17. Mashable: US$2.5 million
18. Alley Insider: US$2.25 million
19. /file: US$2.1 million
20. The Superficial Network: US$2 million
21. Neatorama: US$1.5 million
22. Daily Kos: US$2 million
23. Talking Point Memo: US$1.2 million
24. VentureBeat: US$1 million
25. Wowowow.com: US$1 million

In an attempt to prevent massive layoffs, HP will be cutting salaries across the board.  CEO Mark Hurd will give up 20% while other executives will see a reduction from 10-15%.   Managers and the rest of the employees could see up to 5% reduction.

Here is Hurd’s memo in detail:

Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment.

We grew revenue 1 percent year-over-year, or 4 percent in local currency, and you need to look at these numbers a little differently this quarter. For the first time in a long time, the dollar was strengthening, so the currency conversion was actually a headwind for us. We also continued to show strong operating leverage with non-GAAP operating profit up 10 percent year-over-year. This was a solid performance, and I thank all of you for your efforts.

But really, Q1 was like a tale of two companies.

HP Services — as a result of EDS and TS — had a strong quarter, delivering virtually all of the local currency revenue growth and more operating profit than any other business. It’s gratifying, because this performance was possible because of the hard work we’ve been doing to restructure those businesses.

When you take HP services out of the mix, it’s a very different picture. PSG had revenue down 19%. ESS had revenue down 18%. IPG had revenue down 19%. In fairness, across IT and even other industries, product businesses are struggling in this economic climate. And we did gain share in key market segments. PSG and ESS gained roughly 1 and 3 points of share, respectively. In IPG, quite frankly, we still have work to do across a number of dimensions like inventory, both owned and channel inventory.

In an environment like this, there’s no margin for error and no tolerance for inaction. To give you a little insight into my world, after we report our earnings, we engage in a dialogue with analysts and investors. They’re going to ask what we’re doing in light of the current environment to right-size these businesses.

The math is pretty straight forward. From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue. If you believe the environment isn’t going to improve, you should take a bigger cut to get in front of the problems. You can do the calculation, as easy as I can. We have about 100,000 people in our product businesses, with revenue down roughly 20%, and an environment that may not get any better in 2009.

I’ll be asked by investors, “Where’s the job action, where are you taking out this roughly, 20,000 positions?” Well, I don’t want to do that. When I look at HP, I don’t see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time.

I think we are fundamentally sound, and when the economy picks up, I want HP to be strong, and to take share and to outgrow the market. I said it last quarter, my goal is to keep the muscle of this organization intact. But we do have to do something…because the numbers just don’t add up and we need to have the flexibility to make the right long-term investments for HP.

So we are going to take action. We have decided to further variablize our cost structure by reducing base pay and some benefits across HP. My base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent. The base pay of other executives will be reduced by 10 percent. The base pay of all other exempt employees will be reduced by 5 percent. For non-exempt employees, base pay will be reduced by two-and-a-half percent. Additional efficiencies, including changes to the US 401(K) plan and the share ownership plan, will also be implemented. Of course, the implementation of all of these actions is subject to compliance with local laws and regulations. Follow-up communications will detail the timing and the plans in your location.

This does not change our pay-for-performance strategy at HP. If we outperform, and there is a chance we will, then we will increase the total amount of variable pay. In fact, the financial flexibility we’re gaining helps put us in a better position to compete and to win in the marketplace, and fund the bonus program this year based on pre-adjusted salaries. If the company performs well, if our individual businesses perform well and if you perform well, then you could potentially make up the difference with your bonus. I can’t promise you anything, but I tell you…there is a chance…if we get this right.

To be clear, these actions don’t make up for all of the decline in revenues. We’re also benefiting from the tough actions we’ve taken over the last few years. People always asked, “Why are we so focused on getting costs out in good times?” Now…is why that work was so important. We’ve been able to bank some of those savings, and we’re making a withdrawal, which along with the actions we’re taking today, I hope, will get us through this recession.

Again, there are no guarantees. If the environment gets worse, if the downturn lasts longer than we’re assuming, if our performance declines, we’ll have to reassess. But for now I believe this is the right thing for the strength of HP.

I know this is a tough time. But if we get this right, HP can be the kind of company that not only has led, but will extend its leadership. We can emerge from this recession in a powerful position to create value for our customers, our shareholders and our people for years to come.

Thank you.

Mark

Check out the new ad campaign and see for yourself.

This is a funny video ad from the company.

A British consumer recently purchased the popular Apple iPhone 3G.   The image is believed to be that of a factory worker from Asian contract manufacturer Foxconn Technology Group.

Since these photos emerged, many questions have circulated regarding her identity and whether she will lose her job.  A company official has stated these photos were left on the phone by mistake.

The China Morning Post has dubbed this mysterious girl “China’s prettiest factory girl”.

Craig Newmark, Founder of Craigslist has provided an interesting commentary on CNN.com on how the Internet can strengthen democracy.

He writes: “…people are using the Internet as the platform for tools for elections and governance. Speaking as a nerd, I love the technology, but what really matters is the means by which we all can use the Net to strengthen democracy in the USA.”

Read the full article.

Update: Apparently, Google’s planned cutback was a hot topic of discussion on CNBC.  In fact, it was such big news that Google was forced to do damage control.

The free food has long been a part of Google’s recruiting strategy, although, it is losing its novelty and is not sustainable in the long-term.  However, once you provide this benefit and promote it like Google did, it is extremely difficult to take it away.  For instance, Cisco tried unsuccessfully to cut back on the free sodas in the late 90s and met stiff resistance from angered employees.

Many Google employees mentioned they would gladly give up the free food and be paid on par with employees at other Bay Area companies. “We are working for food not money“, said an employee who did not want to be identified for fear of losing their job.

What is behind the decision to make cuts in its food program? On July 17th, Google shares were down by as much as 12% as their earnings growth reported was below analysts’ expectations. The company might not be as immune as previously suggested to the economic downturn that other companies have been experiencing. If it did not incur the food cost, it could have reduced its operational expenses (OpEx).

Until the smoke clears from this fiasco, the food cuts have been put on hold. Google is in a no-win situation. It has to make up for the revenue shortfall due to the bad economy and appease shareholders not happy with having to pick up the tab for gourmet meals. However, if they cut the food costs, they will have to start paying employees market wages or they will leave. If employees walk out, it will eventually hurt the company. However, if Google starts paying market wages, it will take a big hit to its operational costs.

Suggestion: The company can always test out a new menu. I heard the frozen TV dinner is due for a comeback!

There’s no more “free lunch” at Google so to speak according to Valleywag.  Google will annouce today a cut back in its culinary program.  On the chopping block are free dinners, the tea trolley, and snacks in the afternoon.  Gasp!

Workers at the Googleplex will still be amply fed, with free breakfast and lunch, but it’s a shocking cutback. Google has long milked its cafeterias for their publicity value; company executives have crowed about the company’s resistance to recessions and its commitment to coddling its employees. Founders Larry Page and Sergey Brin even promised shareholders they’d add perks, rather than cut them.

What went wrong? Read on.