Here is the letter Hewlett-Packard (HPQ) CEO Mark Hurd broadcast to employees Wednesday explaining the company’s disapointing reversal in outlook for the fiscal year and its plans to reduce pay and benefits across the board. Shaken by the worsening economy, Hurd said he will reduce his own base salary by 20 percent, executives’ pay by 10 percent to 15 percent, and most employees’ salaries by 5 percent. "In an environment like this, there’s no margin for error and no tolerance for inaction," he wrote.

Hurd’s letter in full:

Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment.

We grew revenue 1 percent year-over-year, or 4 percent in local currency, and you need to look at these numbers a little differently this quarter. For the first time in a long time, the dollar was strengthening, so the currency conversion was actually a headwind for us. We also continued to show strong operating leverage with non-GAAP operating profit up 10 percent year-over-year. This was a solid performance, and I thank all of you for your efforts.