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HP cuts 24,600 jobs in wake of EDS buy

By Patrick Thibodeau
September 22, 2008 12:00 PM ET

Computerworld - Hewlett-Packard Co. last week said it plans to shed 24,600 jobs as part of a restructuring following its acquisition of Electronic Data Systems Corp.

HP announced the layoffs on the same day the stock market nose-dived, a major investment bank failed and the financial services industry appeared set to cut jobs by the tens of thousands.

"That was a tough day on Wall Street," said HP chairman and CEO Mark Hurd in a conference call with financial analysts, in which he worked hard to assure them that HP will act quickly to integrate EDS.

"We will be a bigger, stronger company by the time we get EDS integrated," Hurd said.

The $13.9 billion deal to buy Plano, Texas-based EDS closed late last month.

The 7.5% workforce reduction will be spread over three years, with half of the layoffs coming from the U.S. HP did not say how the layoffs will be split between HP and EDS workers.

HP said it expects the restructuring to cut its annual costs by about $1.8 billion. The company also noted that a $1.7 billion charge will be recorded in its fourth fiscal quarter, which ends Oct. 31.

Hurd told analysts that the company also hopes to take advantage of "other synergies" between the merged companies.

"Having the most efficient cost structure is directly related to your ability to scale and grow," said Hurd.

In an e-mail, John Madden, an analyst at London-based Ovum Ltd., said that integrating EDS in troubled economic times presents a "daunting but not insurmountable challenge" for HP.

He also noted that the goal of the layoff "is the elimination of redundancy in corporate support and other functions and is not primarily due to the shifting of services resources."

Madden added that it "was clear from Monday's meeting [with analysts] that it will take six to nine months for the first real signs of progress from the integration to emerge."

When the merger was first announced in May, EDS said that it had approximately 137,000 employees, including about 47,000 in the U.S.

EDS had been shrinking its domestic workforce, moving more work overseas in part to stay competitive with larger Indian IT outsourcers.

This version of the story originally appeared in Computerworld's print edition.

Read more about Hardware in Computerworld's Hardware Topic Center.



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