Read Léo Apotheker's "Tough Quarter" Memo in Full

The memo that Hewlett-Packard CEO Léo Apotheker sent to his senior executive team about facing a “tough quarter” certainly created plenty of ripples. For one thing, it caused HP to move up its quarterly earnings announcement by a day after its contents were reported in the media, spooking investors.

It wasn’t the first internal memo leaked from HP in recent weeks, but rather the third. Apotheker has since promised to “get to the bottom” of the leakage.

But for all the drama it caused, one thing has been missing: The memo itself. I’ve now obtained a copy of it and present it below.

As you can read for yourself, Apotheker makes several references to work being done on a “headcount plan,” which means layoffs are likely coming. He also instructs his team to limit travel–reiterating warnings given to HP’s Asian PC unit in March–and not to fill positions vacated by people leaving the company. It also makes reference to “flashes,” which I’m told are an executive’s weekly forecast for sales and other key numbers.

Asked on CNBC earlier this week about these memos, Apotheker said HP was being “prudent” by freezing hiring in Asia in the wake of the Japanese earthquake, which has affected, among other things, the supply of components to HP’s printing unit. “We didn’t do anything more than just to do prudent margin management, and actually our investors should applaud us for doing that,” he said, adding that they also show HP is taking the right steps to manage the expectations of investors, given the challenges the company is facing.

HP’s shares are still falling today. They’re down 42 cents, or more than 1 percent, to $36.08. HP has fallen 27 percent since hitting a 52-week high of $49.39 in February.

From: Léo Apotheker
Sent: Wednesday, May 04, 2011
To: Bradley, Todd; Lesjack, Cathie; and eight others
Subject: Second Half Fiscal 11

All,

As we discussed at the EC [Executive Council] meeting Q3 is going to be another tough quarter. One in which we will be driving hard for revenue AND profit; we have absolutely no room for profitless revenue or any discretionary expenditures. We must watch every penny and minimize all hiring. On this last topic, Tracy and Cathie are driving a full headcount re-planning process designed to set a headcount plan consistent with our performance in the 2H11 and the new realities of the market and our position going into FY12; we are working this through your HR and finance organizations. The headcount plans we have for 2H11 are unaffordable given the pressures on our business. Once we agree on the new headcount plan, we will set up the right approval process for exceptions to the new plan.

I can’t stress enough the need to set the right tone for your organizations for the second half. Travel must be limited to essential revenue generating, consulting engagements need to be pushed out at a minimum to Q4 and very likely to Q112, depending on the Flash, attrition needs to be banked, etc.

Finally, we need your best center point Flash next week. It will be the basis of setting expectations with the Street.

Let us know if you have any questions.

Léo and Cathie