Global technology major, Hewlett-Packard Co is finally feeling the strain of the economic slowdown after outperforming the market in recent quarters. It has slashed its employees' salary after the company announced a 13 per cent slump in profits and warned about profit levels for the year ahead.

HP chief executive officer Mark Hurd's salary will be axed by 20 per cent, while other executives and employees will have to take 5-15 per cent cut in their base salary, the company said yesterday.

Earlier in September 2008, the personal computer giant had cut about 25,000 jobs as part of its cost-containment strategy to cope with the fast spreading economic crisis.

The company reported first-quarter sales below analysts' estimates and reduced its earnings forecast for the year on the face of fall in demand and price for PCs, printers and other equipment worldwide.

The company's profits plummeted 13 per cent year-on-year on a revenue $30 billion, below analysts' estimate.  It also reined in its forecast; the annual sales are estimated at $112.5 billion-$116 billion, down $14bn on its previous forecast.

The company also issued weak second-quarter guidance, predicting sales between $27.5 billion and $27.7 billion, well below analysts' estimate of $30.95 billion.

Excluding charges, the company forecast earnings between 84 cents a share and 86 cents a share, below the consensus estimate of 89 cents a share.

Reflcting the desperate mood, HP shares fell almost 8 per cent or $2.69, to $31.39. Thursday on the New York Stock Exchange, the biggest drop since August 2004.

The wage cuts are designed to reduce costs without lay off further staff, an official said.

The cut will be implemented straightaway in the US, but may take a little more time in other countries where unions are stronger. The reduction chops at least $290,000 off Hurd's salary, based on his 2008 pay. Hurd's total compensation was valued at $42.5 million last year, according to regulatory filings.

''Cost cutting remains the key theme and we expect HP to continue to meet or beat earnings despite weak revenue,'' wrote Goldman Sachs analyst David Bailey. Bailey also maintained his 'buy' rating for H-P, citing the company's better-than-expected operating margins: ''Operating margin was significantly better than expected (particularly in printing and services), demonstrating HP's ability to manage expenses in a difficult environment,'' the note said.

The company merged last year with IT contractor EDS. It employs about 300,000 worldwide.

Since June 2008, at least 106 companies have reduced their executives' pay, according to Equilar Inc, an executive-compensation firm in Redwood, California. Out of 106 companies tracked by the firm, 39 per cent are in the technology industry, making it the largest industry undertaking executive pay cuts.

Many companies in Silicon Valley is feeling the pain. Employees are willing to take pay cuts rather than lose a job or see co-workers terminated.

Intel Corp., the world's largest semiconductor maker, has eliminated its budget for merit pay or promotions.

Yahoo! Inc. froze annual pay raises for 2009, while Google Inc. has curbed hiring and abandoned its $1,000 cash gift for holidays.

Texas Instruments Inc. cut 12 per cent of its workforce last month and put a freeze on salaries for all employees in 2009.