Update: HP announces 24,600 layoffs in wake of EDS acquisition

HP chief Mark Hurd says that unless the combined companies can operate efficiently, they can't grow.

On the same day the stock market nose-dived, a major investment bank failed and the financial services industry appeared set to shed jobs by the tens of thousands, Hewlett-Packard Co. contributed to the gloom, saying it would add 24,600 people to the unemployment lines as part of a restructuring in the wake of its acquisition of EDS.

The workforce reduction will be spread over three years and affect about 7.5% of the combined companies' workforce, HP officials said.

Half of the workforce reduction HP will be making will affect workers in the U.S. The plan follows its $13.9 billion acquisition of Electronic Data Systems Corp. in May, which was completed late last month.

HP is now working quickly to integrate EDS, and Mark Hurd, the company's president and CEO, was business-like about the news at a briefing today for financial and industry analysts.

"That was a tough day on Wall Street," said Hurd, who worked to assure financial analysts that HP will act quickly to integrate EDS.

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

When the merger was announced, EDS said it had 137,000 employees, with about 47,000 of its employees in the U.S. EDS has been shrinking its domestic workforce, moving more work overseas in part to stay competitive with larger Indian IT providers. It was unclear from today's announcement exactly how many of the employees losing their jobs are from EDS or HP.

But one thing seemed clear from the conference: Hurd is looking for more ways to improve the efficiency of HP's operations, and it seemed, based on what he said, that more reductions are possible. He said that there are "other synergies" that HP is looking at related to the acquisition. Hurd said having efficient operations is critical to growth.

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

HP officials, during the briefing -- its most extensive yet since it announced plans to take over Plano, Texas-based EDS -- argued that EDS's expertise and services are complementary to HP's.

The company said it believes more companies will turn to service providers for help because of business demands. Ann Livermore, vice president of HP's technology solutions group, said that its own surveys showed that 51% of CIOs "say it is urgent for them today to transform the data center."

HP is also investing heavily in automation and believes that it -- not offshoring -- is what reduces cost the most. Livermore told analysts that a lights-out, fully automated data center is "what people want."

Copyright © 2008 IDG Communications, Inc.

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