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HP cuts server development team:

By Mike Tarsala, CBS.MarketWatch.com
Last Update: 9:54 AM ET Sept. 28, 2001

PALO ALTO, Calif. (CBS.MW) -- Hewlett-Packard sent pink slips this week to
about 100 of its engineers and said it plans to shutter a research and
development facility that invents software for its server computer
products.

The job losses, which the company confirmed Thursday, will be part of the
6,000 positions H-P previously announced it would trim from the company's
ranks in an effort to cut costs.

The employees represent less than 2 percent of H-P's (HWP: news, chart,
profile) planned job cuts.

But axing the development group may run counter to statements CEO Carly
Fiorina recently made that the computer-and-printer giant plans to increase
research and development staffing.

"Despite the tough times, we are effectively re-balancing our work force
into revenue-generating and R&D areas," Fiorina said in explaining the
6,000 job cuts following the release of H-P's fiscal third-quarter
financial results in mid-August.

Company spokesman Dave Berman said that cutting the engineers was a
necessary part of "a series of ongoing moves" to make sure H-P was
competitive. He wouldn't speculate about the possibility of future research
and development job cuts.

Berman said he wasn't certain whether H-P has added or lost research and
development employees so far this year. The company kept research and
development spending nearly unchanged compared with year-ago levels in its
fiscal third-quarter, ended July. The $662 million spent on research and
development is about 6.5 percent of revenue.

H-P executives let go the majority of workers at the company's Enterprise
Intel Architecture Lab in Florham Park, N.J. The facility, which
specializes in Unix operating software that can work on both on traditional
RISC-based and Intel-brand chips, will close.

Engineers at the lab had been hired away to form the lab in 1996 from AT&T
Bell Labs, Nortel, The Santa Cruz Operation, and other companies. Several
had more than 20 years of Unix software expertise.

One analyst said the move was surprising.

"Guys like this are so hard to find," said Steve Allen, analyst with
Hotovec, Pomeranz & Co. in San Francisco. "It's like trying to find
algorithmic mathematicians. It surprises me that they'd let any guys like
that go. It doesn't make any sense at all to me, to be honest."

The Florham Park group had led a three-year project to let customers move
their H-P's Unix operating system software applications to computers that
use the new Intel IA-64 chip architecture, a high-end microprocessor design
for servers that other H-P engineers co-developed.

Florham Park employees also had worked on future generations of H-P's
operating software, which is designed to work with upcoming IA-64 chips.
The next-generation chips are supposed to be put into new servers by May.

Executives at H-P long have held that the IA-64 architecture and related
software technologies are an integral part of H-P's long-term server market
success. H-P and other server makers will use IA-64 as the basis of new
chips for as many as 10 years.

In the past, executives from H-P had touted that their inside knowledge of
IA-64 would produce better HP Unix operating software, as well as other
related server advances that could make better use of the Intel chips'
power. They continually said their engineering knowledge would result in
computer systems that are a step ahead of the market.

Berman said that much of the work done in the New Jersey lab can be handled
at H-P's Fort Collins, Colo. facility. He added that some -- workers say 23
of 120 who worked there -- have been offered jobs in Fort Collins.

"We have a commitment to the Itanium platform, and we will continue to work
on next-generation chips," Berman said. 'There may be parts of the chip
development that we are not going to pursue. But that doesn't mean we're
not committed to the overall development."

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Comment: Several things should be coming clear, with all the changes Carly
has made. It would appear that her vision is to create a giant computer
hardware company which acts as a conduit for PCs, printers, scanners, fax
machines, etc. In such an environment, MPE becomes a minor appendage, and
could either be milked as a cash cow or lopped off to reduce expenses; it
would be entirely too easy to do and tempting to pass up.

With the current climate, there is at least a chance that the merger may
actually take place in spite of business analysts, employees, and customers
to the contrary. It should be clear that this initiative will be pushed
through and the principles at the top of the corporate heap aren't
listening to dissention. The merger has been declared an offensive measure
[as opposed to a defensive measure], and most of us have a difference of
opinion of what she means by "offensive measure", but find ourselves
agreeing that it is truly an offensive measure.

Is the handwriting on the mall? MENE, MENE....

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