HP-EDS Growth Strategy: 24,600 Employees to Be Laid Off

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

On a day where the stock market nosedived, a major investment bank failed, and the financial services industry appears set to shed jobs by the tens of thousands, Hewlett-Packard Co. added to the gloom, saying it would add 24,600 people to the unemployment lines.

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 that HP will be making will be to workers in U.S., and it follows its $13.9 billion acquisition of Electronic Data Systems 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 the employees in the U.S. EDS has been shrinking its domestic workforce, moving more work overseas in part to stay competitive with the 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 the operation and it seemed, based on what he said, that more reductions were possible. He said that there were "other synergies" that HP is looking at related to the acquisition. Hurd said having an efficient operation was critical to growth.

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

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

This story, "HP-EDS Growth Strategy: 24,600 Employees to Be Laid Off" was originally published by Computerworld.

Copyright © 2008 IDG Communications, Inc.

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