HP set to slash 24,600 jobs
Company wields the axe following EDS acquisition
By Grant Gross and Stephen Lawson, IDG News Service | Published: 08:28, 16 September 2008
Hewlett-Packard will lay off 24,600 employees over the next three years in an effort to streamline the company following its $13.9 billion (£7.75 billion) acquisition of Electronic Data Systems, which was completed last month.
The layoffs will be part of a three-year restructuring programme, said HP. The company will lay off about 7.5 percent of its workers during that time, with nearly half of the reductions coming from HP's US workforce, HP said. About half the cuts will take place in 2009.
Half of the positions will eventually be replaced, the company said.
In the UK, EDS runs major contracts for the Ministry of Defence , the Department for Work and Pensions , including the Child Maintenance and Enforcement Commission , which has replaced the Child Support Agency. It is embroiled in legal action with Rupert Murdoch’s Sky and could be about to confront Transport for London over the loss of the contract to run the Oyster travel card.
"I can assure you, we will nail this integration," said HP Chairman and CEO Mark Hurd. The company has mastered integration while buying 30 companies in the past three-and-a-half years, he said.
"We do believe the synergised companies are in a pretty damn strong market position," Hurd said.
The restructuring programme is expected to save HP about US$1.8 billion each year, HP said. HP will take a $1.7 billion charge in the fourth quarter of 2008 related to the restructuring.
The acquisition of systems integrator EDS was intended to give HP a comprehensive portfolio of IT products to help customers manage and improve their technology systems, HP said.
In addition to the job cuts, HP plans to cut costs through synergies in real estate, IT infrastructure and procurement contracts, Hurd said. The integration team has had about 500 full-time and 1,000 part-time members, according to HP.
The acquisition has been well-received overall within EDS' Agility Alliance, a group of partners that includes HP rivals such as Sun and Dell, Hurd said. Most members, even those considered competitors, have reacted favourably, he said, but "a couple" have been less welcoming, he said. Following the acquisition, HP will not force its own products on all its services customers, Hurd said.
Ongoing cost-cutting efforts at HP even before the EDS deal have prepared HP to carry out the coming cuts appropriately, Hurd said. The company has cut its costs twice as much in 2008 as in the year before and will cut even more next year, he said.
"This is a really tough day for us," Hurd said. "As easy as it is to put numbers on paper ... We've got to go do tough stuff."
