After spending his first four months as CEO studying the struggling Hewlett-Packard (HPQ), Mark Hurd made his first big move on July 19. And big it was: He cut 14,500 jobs, or 10% of HP's workforce, and scrapped its decades-old pension program after grandfathering some longtime employees. To better compete with rivals like Dell (DELL), EMC (EMI), and IBM (IBM), he simplified the soup-to-nuts sales approach championed by predecessor Carleton S. Fiorina. "Our objective is to create a simpler, nimbler HP," he told analysts.
HP has long needed to tighten its belt, say analysts and many employees. And while critics say he was little more than a cost-cutter while running NCR (NCR), Hurd has made a compelling case for the overhaul. The cuts, he argued, are designed to help HP hit growth and profit goals for 2008 -- not next quarter. "It enables people to start thinking about the future with a little less emotion and a little more analytics," he says. Next up: refining HP's strategy to determine where growth will come from.
These are queasy days for flu vaccine maker Chiron (CHIR). On July 20, the Emeryville (Calif.) biotech company announced that it will not be able to supply one of its vaccines to customers outside the U.S. during flu season. A few days earlier, Chiron discovered a contamination problem in a plant in Germany that makes the vaccine. Earlier this summer, Chiron tempered expectations for flu vaccine sales in the U.S., saying it would only be able to produce up to 26 million doses. That's half the capacity anticipated before contamination shut down its British facility last year. Investors aren't feeling so hot, either: Chiron shares are down 4% since the news surfaced about the German plant on July 15.
It's almost like old times at eBay. Buoyed by renewed growth in its core U.S. and German operations and continued expansion of its PayPal online payment unit, the online marketplace reported better-than-expected results on July 20. Profits for the second quarter jumped 53%, to $291.6 million, or 21 cents a share. That's 4 cents above analysts' expectations. Meanwhile, sales rose 40%, to $1.1 billion. EBay also hiked its profit and sales estimates for the remainder of the year. The latest results reverse two quarters of slowing revenue growth and disappointing profits. "We saw strong growth across all parts of the business," said CEO Margaret Whitman.
Dogged by weak sales, falling prices, and rising health-care costs, General Motors (GM) and Ford Motor (F) reported huge losses in their home markets. Due to a surprisingly large $1.2 billion loss in North America, GM lost $318 million in the second quarter, vs. a profit of $1.4 billion a year ago. Ford made $946 million, but that was due largely to a windfall of $700 million related to taxes. By contrast, Ford earned $1.2 billion in the 2004 quarter. In the latest quarter, the auto maker racked up $907 million in red ink in North America. Reversing the flow won't be easy. After GM drove sales up 46% in June by giving all buyers its employee price, Ford and Chrysler Group (DCX) followed suit. That may lift sales, but the profit-draining price war shows no sign of ending.
After recalling virtually all of its implantable defibrillators in June, Guidant (GD) warned on July 18 that another of its heart devices may be prone to failure. The Indianapolis company said pacemakers made in the late 1990s and surgically implanted in 28,000 patients may malfunction. It added that the failure rate is statistically remote: 69 out of 78,000 implants. Johnson & Johnson (JNJ) agreed in December to buy Guidant for $23.9 billion, before the series of product problems arose. Although J&J is sticking with the deal, analysts expect the medical giant to lower its offer of $76 a share.
-- Intel (INTC) reported second-quarter profits jumped 16% on sales of $9.23 billion.
-- Eastman Kodak (EK) announced plans to eliminate up to 10,000 jobs.
-- Royal Dutch/Shell Group (RD) ended a bifurcated governance setup between Britain and the Netherlands.
Ecstatic investors pushed shares of Amgen (AMGN) up 15%, to 81.17, after the biotech giant announced surprising double-digit sales and profit growth in the second quarter. Earlier fears that Medicare changes would pinch sales have proven unfounded.