HP to lay off 24,600 in EDS integration

16 September 2008

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.