HP to cut nearly 25,000 jobs post EDS buy

By Suzanne Deffree, Managing Editor, News -- 9/16/2008

Hewlett-Packard has announced plans to cut approximately 7.5% of its workforce, or about 24,600 employees, over the next three years, with nearly half of the layoffs impacting United States-based employees.

The move is part of an overall restructuring plan at the Palo Alto, Calif-based tech industry giant and comes post HP's $13.9 billion acquisition of services company EDS (Electronic Data Systems Corp). The August-closed acquisition was, by value, the largest in the IT services sector and the second largest in the technology industry, following HP's $25 billion acquisition of Compaq, which closed in 2002. The deal brought HP's total headcount to approximately 320,000.

“HP now has the broadest technology capabilities in the market to meet customer needs today and in the future,” said Mark Hurd, HP chairman and CEO, in a statement made Monday afternoon. “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.”

HP further said that in addition to the workforce duplications, it has identified synergies in corporate overhead functions, such as real estate, IT, and procurement.

HP also said it expects to replace roughly half of the 24,600 axed positions over the next three years to create a "global workforce that has the right blend of services delivery capabilities to address the diversity of its markets and customers worldwide." Analysts are viewing the statement as positive.

"The company announced its highly anticipated plan to reduce its combined workforce of 320,000 employees by about 24,600 … but commented that it plans to add about half that amount over the next three years to create a global workforce. We interpret that as adding staff in faster growing international markets, which we believe makes a lot of sense," Shaw Wu of American Technology Research said in a research note this morning.
 
HP estimated the restructuring program will result in annual cost savings of approximately $1.8 billion and said it expects to record a charge of $1.7 billion in its current fiscal quarter on the restructuring plan.

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