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Fiorina defends HP job cuts to shareholders

Some shareholders say the decision to lay off 1,700 employees runs counter to the tenets of company co-founder William Hewlett.

Hewlett-Packard CEO Carly Fiorina defended her company's recent layoffs on Tuesday amid criticism that the cuts run counter to the tenets of co-founder William Hewlett.

During the company's annual shareholder meeting, Fiorina addressed HP's actions amid an economic slowdown that has struck not only PC sales but higher-end servers as well.

The challenges have caused HP to delay raises, cut 1,700 jobs and curtail discretionary spending since late last year.

Although shareholders often are concerned about numbers such as profit and loss, Fiorina on Tuesday had to deal with the human side of her business decisions.

One employee at the Palo Alto, Calif.-based company said he was among those who either must increase his performance or lose his job.

"I've been with HP 14 years. Something is broken: performance management, headcount management," he said, quoting Hewlett's belief that HP's "greatest assets are our employees."

Fiorina said the layoffs are not only justified as HP adapts to a changing computing landscape and reduces overlapping product lines, but also are "very consistent with the HP way."

Employee surveys show that 70 percent of HP employees believe managers need to deal with low performance, she said. "Either we coach them to higher levels of performance or we help them depart the company in dignity," she said.

"I think HP is going through three very significant shifts all at once, which is a very hard thing to do," Fiorina told shareholders.

"First, we are experiencing an economic downturn that was both sudden and sharp. To protect our business, we have had to take some actions that were difficult for employees. I asked all of us to sacrifice a little so none of us would have to sacrifice too much." HP, for example, delayed raises by 90 days.

Second, HP faced "a shift in the technology landscape from a pure product era to an era of networked systems. That is causing great reinvention and, in some cases, dislocation. We had to revamp our product lines and narrow and sharpen our focus," Fiorina said.

In addition, the company is undergoing "a major organizational change to bring the customer focus back into the center of our business," Fiorina said. "Frankly, in the past, we had been more in love with our products than we had been with our customers."