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HP, National Semi Lull in PC Demand

July 31, 1998

SAN JOSE, Calif. (AP) _ Economic woes in Asia and a lull in demand for personal computers have inflicted their latest damage: pay cuts, temporary shutdowns and unpaid days off at two of Silicon Valley’s biggest companies.

Hewlett-Packard Co. is reducing the pay of more than 2,000 managers worldwide by 5 percent for the next three months as it tries to reduce expenses following disappointing financial results. The company, the world’s third-largest computer maker, also will close its offices between Christmas and New Year’s Day.

And National Semiconductor Corp., which earlier announced plans to cut its work force 10 percent, is asking all employees to take 10 days of accrued vacation or unpaid leave.

The companies’ announcements on Thursday were the latest evidence that Asia’s economic troubles have hit U.S. high-tech industries hard. Also affecting the sales and earnings are a slowdown in domestic and European demand for personal computers and a subsequent PC price war.

Intel, the world’s largest computer-chip maker, is trying to reduce the number of its employees by 5 percent through attrition and voluntary departures. It also closed two Oregon plants for eight days earlier this summer.

Silicon Valley, which in recent years has boomed, is no stranger to less favorable conditions.

``We have upturns and downturns based on availability of products and demand, and this one is exacerbated by the fact that you have the Asian money crisis this time around,″ said industry analyst Tim Bajarin, president of Creative Strategies Inc. in Campbell, Calif.

But he believes demand is starting to pick up again in the United States and Europe, which should help moderate the effect of Asia’s recession. Expectations of increased demand have also curbed the desire of large Silicon Valley companies to react to recent problems with pink slips, said Robert Herwick, president of Herwick Capital Management in San Francisco.

``The people who run these companies remember how hard it is to hire and train new people, so they’re not going to let them go if they can help it,″ he said.

Hewlett-Packard Co., based in Palo Alto, Calif., said Thursday that it will cut the pay of middle- and top-level managers _ including chief executive Lewis Platt _ 5 percent for three months. The reduction takes effect Saturday.

The company, which makes a wide variety of computers, printers and test-and-measurement equipment, also plans to close its domestic operations for the four work days between Christmas and New Year’s Day and will ask its overseas offices to do the same.

HP, which does 16 percent of its business in Asia and has suffered a series of disappointing quarters, has been trying to cut expenses in other ways as well. It has limited hiring and employee travel and closed some operations for a few days over the Independence Day holiday. The company said it is trying to avoid layoffs.

National Semiconductor, with headquarters in Santa Clara, Calif., is asking its 13,000 employees to take time off _ through vacation or unpaid leave _ between Sept. 1 and Nov. 1. The company said earlier this spring that it will cut its work force by 10 percent.

Also on Thursday, Novellus Systems Inc., which produces equipment used in making semiconductors, said it will lay off 180 employees, 10 percent of its work force. That move follows the paring of 180 jobs in June.

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