The world's largest computer maker, Hewlett Packard, yesterday said it plans to cut 24,600 jobs over three years as it integrates enterprise technology firm Electronic Data Systems Corp, which it acquired for $13.9 billion in August, to emerge as IBM's stronget challenger  (See: HP completes $13.9 billion acquisition of EDS).

Before the acquisition, HP had 178,000 employees and EDS 142,000, a total of 320,000, making this cut to 7.5 per cent of the company's combined work force. The company said it would take a one time charge of about $1.7 billion in costs relating to the restructuring programme in the fourth quarter of this year, but estimates it will save the company $1.8 billion a year from this reduction.

Most of the cuts, with about half of them coming in fiscal 2009, will be in non-consulting areas, such as human resources, finance, legal, real estate and other business sectors where there are duplicated functions within the combined companies, though HP says it plans to eventually add about half the positions back as different jobs in different departments within the company.

About half the layoffs will be in the United States, with more than half affecting EDS employees.

HP said in a press release on Monday that it expects to replace about 12,300 of the affected positions over the next three years in an effort to create ''the right blend of services delivery capabilities to address the diversity of its markets and customers worldwide.''

According to IDC and Gartner, the global IT services market is estimated to be worth about $50 billion per year. IBM has about 22 per cent of the global market which works out to approximately $11 billion per year.

Hewlett-Packard is making a major play to become the world's No1 for building next-generation data centers and is relying heavily on the addition of EDS's well-established service business to help it gain 4 per cent of the growing IT service market which will give it about 7 per cent overall but still some 15 per cent behind IBM.

''HP now has the broadest technology capabilities in the market to meet customer needs today and in the future,'' Mark Hurd, HP chairman and CEO told analysts. ''HP has a strong track record of making acquisitions and integrating them to capture leading market positions. We will deliver on the promise of HP and EDS for our customers and shareholders.''

The computer maker intends to implement a restructuring programme for the EDS business group that will better align the combined company's overall structure and efficiency with HP's pwn operating model.

EDS is HP's largest acquisition since acquiring Compaq for $25 billion in 2001, and more than doubles HP's outsourcing services business. Over six years HP had acquired 15 software companies, including Opsware, Mercury Interactive and Peregrine Systems.

It had acquired EDS to compete with IBM's technology services business, however some analysts opine that EDS's costs are too high to compete with lower-cost services firms in India and that it still lagged behind IBM, which has a large consulting arm.

While IBM still leads the tech services industry, HP, the world's largest PC maker is in second place. Last year HP and EDS had combined revenue of $38.8 billion in services whereas IBM had $51.4 billion revenue in total technology and business-services in 2007.