Hewlett-Packard to squeeze extra £350m savings from job cuts

Hewlett-Packard plans to squeeze $500m (£350m) of extra cost savings from the acquisition of its rival Compaq, and set a deadline of shedding 15,000 staff by the end of next year.

And the computer company said yesterday it was prepared to cut more staff if business conditions worsened in the tech sector, as it cut sales forecasts for the coming months.

The company announced the action plan in its first meeting with analysts since pushing through the $19bn deal despite bitter opposition from Walter Hewlett, its largest shareholder and son of the company's co-founder. The company had predicted the acquisition would generate $2bn in cumulative cost savings by the end of 2003 and $2.5bn in 2004. Carly Fiorina, chief executive of Hewlett-Packard, said the company now expects to save $2.5bn by 2003 and $3bn the following year.

The upgrade is partly due to the fact that Hewlett-Packard believes its plans to shrink the workforce by a tenth can be achieved more quickly than it expected. Ms Fiorina said: "We think moving faster on headcount reductions is good for employees, particularly when it reduces uncertainty."

The job cuts largely are being carried out through voluntary retirement rather than layoffs. The charges from paying compensation, closing facilities duplicated by the merger and other costs associated with the deal are expected to total $2.1bn.

Ms Fiorina said technology customers were still cutting back spending. Sales in the second half of the year will be between $35bn and $36bn, about $2bn below the total made by the two companies in the same period last year.

She headed off criticism about her pay at a time when Hewlett-Packard is cutting so many jobs. She said she would not take an increase in salary until after employees received increases, which would not be until the company had finished implementing redundancies.