Whatever the date for the release of the N-Class and A-Class e3000s, the Commercial Systems Division will roll them out in an economic climate of lowered expectations. HP has been sending signals a-plenty that it expects the first half of its fiscal year, through April 30, to reflect the slowdown in economic growth analysts are observing worldwide. In December HP announced a 90-day moratorium on raises throughout the company, and it has suspended bonuses for its top managers since late last year. In that month CEO Carly Fiorina returned $625,000 of her yearly bonus, saying the company had not met its goals for the second half of its fiscal 2000 and so she wasn’t entitled to the money. Her full compensation package for 2000 was a total of $2.77 million, so giving back a part of the bonus was like turning in almost one quarter of her pay.

But if all that wasn’t enough, HP made it very plain in early January that profits will be down. Like virtually every other going concern in computing, the company issued an earnings warning. On January 11 the HP notice said that “based on worsening economic conditions and a deceleration in corporate and consumer IT spending in recent weeks, primarily in the US, the company no longer expects to meet previous first quarter guidance. The company now expects to achieve earnings per share in the range of 35 to 40 cents for its first fiscal quarter.” Fiorina said in one interview that December’s sales dropped off so far from November that “it was like somebody turned the lights out. Underlying the financial guidance we provided in early December were core assumptions about the condition of the consumer and enterprise IT marketplaces. We anticipated a slowdown in US consumer IT spending and continued strength in enterprise IT spending, all in the context of the prevailing view that the US economy was headed toward a soft landing.”

HP now believes the landing won’t be as soft as hoped. “It's clear there’s been a significant change in market conditions in recent weeks,” she said on Jan. 11. “Consumer spending in the US has been below even our own conservative estimates, and our enterprise customers — responding to the growing economic uncertainty — have become increasingly cautious about IT spending.

The depth and duration of the downturn remains a mystery for most economic analysts. Ford, Eastman Kodak and Whirlpool all reported weak fourth-quarter sales and cut their 2001 forecasts. Morgan Stanley Dean Witter said the economy was just beginning a recession, but qualified the news by saying it would be the smallest one in the past 100 years. And more popular analysts such as Tom Gardner of the Motley Fool Web site reminded readers that a recession is two consecutive quarters of lower economic growth. There hasn’t been enough time elapsed yet to qualify on that definition. HP doesn’t expect things to improve before the end of its second quarter, and it’s refraining from giving full fiscal year guidance — the markets’ term for a forecast of profits. HP says that it’s “staying focused on operational excellence and on achieving our earnings targets by aggressively pursuing profitable growth opportunities and effectively managing expenses.” Economic uncertainty can snowball, but some say it’s just a counterbalance as firms that bulked up IT resource for the Y2K shift back off and implement what they’ve purchased. Computers and software make up half of all business spending, according to Merrill Lynch analyst Thomas Kraemer. That means the way out of recession could be through orders from IT departments. It’s good fortune for e3000 customers that they’ll have some compelling purchases to consider soon.