HP to cut nearly 25,000 jobs as part of EDS integration

HP to cut nearly 25,000 jobs as part of EDS integration

Summary: Hewlett-Packard is releasing details of its plans to integrate EDS into growth strategy, including a restructuring plan for the EDS business group that will reduce the workforce by almost 25,000 employees - half of which are in the U.S.

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Hewlett-Packard is releasing details of its plans to integrate EDS into growth strategy, including a restructuring plan for the EDS business group that will reduce the workforce by almost 25,000 employees - half of which are in the U.S. - over the next three years. From HP's release:

The restructuring program will take place over three years and includes a workforce reduction that will streamline the combined companys services businesses. Workforce reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate. Approximately 7.5 percent of the combined companys workforce, or about 24,600 employees, will be affected over the course of the program, with nearly half of the reductions occurring in the United States. HP will provide employees affected by this restructuring program with severance packages, counseling and job placement services. HP expects to replace roughly half of these 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.

The company said it expects the restructuring will result in a cost savings of about $1.8 billion, net of reinvestment in other areas. The company will be recording a charge of $1.7 billion in Q4 2008 - $1.4 billion of which will be recorded as goodwill and $0.3 billion of which will be recorded as a restructuring charge that will be included in HPs GAAP financial results.

In the analyst's meeting this afternoon, the company is expected to discuss its broad offerings that CIOs might consider as they rethink their technology infrastructures and consider outsourcing or moving into services through the cloud.

 Also see: HP vs. IBM: The looming IT services war.

IBM targets HP’s server beachhead

updated: HP updated analysts in a meeting with its strategy on integrating EDS into the company's portfolio and culture. The company said it has been identifying the demands of the new marketplace and looking at ratio between what IT spends on maintenance and support vs what those departments spend on innovation.

One of the things HP says it wants to offer with its portfolio of offerings - across the board in hardware, software and now services - is flexibility in meeting the customer's demand. CIOs today are dealing with four big issues: 1) needing to flip that spending ratio to less on maintenance and more on innovation, 2) modernizing data centers to deal with increasing business demands, 3) take advantage of what virtualization has to offer and 4) turn the digital explosion into an advantage by using tools to better manage the data. And there are choices on how to do it: buy it from HP or let HP do it for you, executives said.

HP points back to the acquisition of Compaq as a platform for being strategically capable to integrate EDS and offer customers a better value. The two companies needed each other to elevate in areas where they weren't big players, they said. They see little overlap in their offerings but similar goals and and cultures that will allow the two sides to morph and become a bigger player, second to IBM.

The two plan to leverage each others strengths - EDS has a strong customer base already and contracts that HP will inherit, creating an existing lineup of customers that could become potential customers of HP's hardware and software products, along with services. HP, on the other hand, brings things like resources and strong R&D arm that will help the EDS side of the business to expand technologically.

The meeting continues with details about the financial impact of EDS integration.

updated: In the second half of the analysts's meeting, the company laid out details about finances impacted by the EDS integration.

In terms of workforce reductions, the company noted that there will be a reinvestment in the workforce that will take place to offset some of the reductions, half of which will be spread out over 2009. For example, as the companies streamline areas like IT, there will be a boost in sales personnel. The company expects that half of the headcount lost through the reduction will be replaced.

In terms of reporting financial results, HP said EDS finances will be wrapped into the HP services line item and not reported separately.  The company did not adjust its eps guidance for the fourth quarter and said it will offer guidance for fiscal year 2009 during its Q4 call.

Finally, the company addressed rumors of the impact on retirement plans, stating that EDS will be converted to a more-generous HP plan but that the conversion is not expected to have a significant impact.

Topics: CXO, Hewlett-Packard, IT Employment

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28 comments
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  • best move so far

    This is how we are going to keep America competitive and eliminate the pork that goes to useless employees rather than the stockholders.
    Linux Geek
  • You missed the restocking part ...

    About half of the positions will be re-filled, just not from America. Both HP and EDS already had aggressive offshore organizations, but this is now an in-your-face announcement that HP isn't doing any software or services in the US, it will all be done from India. With the labor and housing markets already bad in California, there will be another 6000-7000 tech professionals out of work, unable to pay their mortgages, and filling out applications at Best Buy.

    I also don't think that this is the last pass, there will be more from HP, and IBM will also cut jobs again this year. In total, I imagine that we will see about 75,000 tech jobs leaving the country by the end of the year. Couple that with the state of the economy in general, and you will see the vicious cycle that will haunt us for the next decade as unemployment and inflation go up, consumer spending goes down, and collapse keeps spreading to other industries. Not a good time.
    terry flores
    • It can't be helped.

      It's just a simple logic. The salary for one staff in the State could fund like dozens of people in countries like India,China or Thailand. And since there are not much differences in performances and skills, why do they need to pay ten times more?

      I afraid that if the situation keeps going on like this, Silicon Valley would become a desert within the next 30 years.:(
      Dealing
      • Hmmm

        As an IT engineer from a third party country, i should perhaps happy because of the fact that people fired from HP U.S would be replaced by an identical or even greater number of people from a third world or emerging country, but i am not.
        You see there must be some kind of equilibrium in economy and such actions from big companies will soon or late hurt economy.
        Those people fired represent a significant economic force and are customers of other companies.
        Those other companies are potentially customers of HP itself or customers of other companies which are customers of H.P.
        Moreover as said in another post, those people could become I.T managers in other companies which are HP customers and do their best to reduce to a strict minimun purchases of HP products.
        Thus by firing such a number of employees, HP will indirectly hurt its incomes in quite a close future.
        If HP or other big companies are serious about reducing their costs, they must reduce the salaries of their top managers.
        It is well known that the middle class is much more useful/significant for the economy of a country than a small number of very rich people which would more likely spend their money outside of their own country or in fiscal heavens.
        Such actions from HP also hurt middle class.
        timiteh
      • It CAN be helped

        I contract for a company that has a help desk in India and it just doesn't work. They seem like nice people and are technically competent but the language barrier is insurmountable. A customer told me that he was on the phone for over an hour with them and finally just hung up. EX. "press B as in Ball." was really "Press P as in Paul".
        jimrhenow@...
  • In the meantime.

    In the meantime, they will continue to sell poor quality items, saving them the costs of shipping, since nobody will actually buy their products.
    CobraA1
    • Cut the bull

      The fact is that HP makes very good quality items. I have one of their old HP drives in my computer.... 2 years and it is still going strong, though it has been VERY lightly used to burn discs and read discs (I download most of my installation packages for programs online).
      As to their printers, computers, etc.: I have been very satisfied with their products. They were a LITTLE underpowered for the money 3 years ago when my parents bought their first computer for use in their bedroom (we have since decided to ONLY buy laptops anymore!) but..... Que sera sera! All of them were underpowered and overpriced at that time period, to be honest.
      With the upgrades I have done to it (installing a better power supply, better video card, more RAM), it's still a kick butt machine, to be blunt.
      Lerianis
  • Cuts work both ways

    A couple of decades ago, another big computer company (Unisys) had massive layoffs. Because of specialization, most of the people ended up working for their former customers, some in senior positions. One ended up as my boss at government agency in Houston. He was always smiling and courteous when the execs from his former company visited, but in two years he had almost completely dumped all Unisys gear and replaced it. I remember the shocked look on the branch manager's face when he finally realized his prime account was toast because of a "disgruntled" laid-off employee.

    It doesn't happen often enough for a big CEO like Hurd to worry about, but when it does, payback is sweet!
    terry flores
  • Yeah, that is sweet

    The fact is that most companies who fire employees or 'lay them off' like this would be better spent cutting money at the top echelons of management: CEO's, CFO's, etc.

    Those are the people who are a severe drain on the companies that they work for. Why? Because they do very little 'real' work for the money that they are getting!
    Lerianis
    • you're grossly misinformed..

      [i]"Those are the people who are a severe drain on the companies that they work for. Why? Because they do very little 'real' work for the money that they are getting!"[/i]

      All of those people were let go in the previous cuts by EDS. There was a cut a month or two ago where a dozen friends of mine all with 20+ years with EDS were all let go. And these were not lazy people who did "very little 'real' work." All of them went above and beyond expectations and earned their pay.

      This "stuff" from EDS is why I took the early retirement in November 2007. I got tired of being treated like a short-term contractor instead of a talented systems analyst with 20+ years.

      What this boils down to is that they didn't get enough people to accept the early retirement buyout, so EDS needs to cut more to get the financial numbers down.
      dinosaur_z
  • Job Cuts mostly administrative

    What the above story doesn't say, most of the cuts will come in the Accounting, HR, IT and other departments that are duplicated with the acquisition of EDS. This is not an off-shoring series of job cuts.
    M.W.Jones
    • EDS doesn't have 25,000 "administrative" jobs

      Maybe about 10% of the jobs are administrative. The other 22,000 are marketing, middle management, and service delivery people. But as others have mentioned, you can get a college graduate in India or Indonesia for $7-$10 an hour, plus minimal benefits. That's about what a fast-food server makes in the US.

      The newsworthy thing about this is that HP actually made any reference to refilling the jobs using "global" resources. Most companies would not have mentioned it at all and just done it below the radar.
      terry flores
  • growth strategy ... leverage each others strengths

    You know when you read "growth strategy" and "leverage each others strengths" that some executive team is going to get a huge bonus and jump out of the flaming airplane with a golden parachute just before it hits the ground and explodes. There won't be anything left of EDS or HP soon.
    scott1329
  • RE: HP to cut nearly 25,000 jobs as part of EDS integration

    "nearly half of the reductions occurring in the United States"..........
    HP expects to replace roughly half of these(25,000) positions over the next three years to "create a global" workforce

    Once again jobs leaving the US of A.
    rrbender@...
  • stop the bleeding

    No doubt the acquisition of EDS is a good strategic move. Cuts in workforce expenses should come at the top, if not in personnel then pay.

    The $8B company I work for pays the CEO about $250K.Yr. He's not doing it for the money or for $250M, but aparently for the challenge. Might seem lofty, but they also avoid layoffs in favor of cost cutting.

    The whole thing does smell of replacing US employees once again by cheap labor. For what you pay a US engineer (100K$) you can hire ten from India (400KR each).

    For sure there should be a heavy tax and charge on corporations foreign and domestic operating in the USA for every US Citizen they fire and for every non-USA employee they hire to replace the US Citizen. It's way past time to protect the economy by discouraging labor exports.
    opcom
    • and vote for the right candidate in November

      [b]It's way past time to protect the economy by discouraging labor exports. [/b]
      McCain and Palin will save the US worker by shaking up Washington and the corporations that export these jobs, and will not erect walls of protectionism as liberals want.
      Linux Geek
      • Mccain and Palin

        People have to be kidding me on trying to sell another Republican ticket after 8 years that has got us in this mess. People are either brain washed or really kidding themselves. I'd rather take a chance on something new than the same old same. I believe that the last time we had a prosperous economy was...hmmmmm, during the Democratic years of Clinton. The Pubs had 8 long years already.
        Darltk
        • Mccain and Palin

          Don't get me wrong , I have always been a Dem, but if you lok at their platform now, it is becoming exactly what we werem against all during the Cold War. I will never vote for any form of Socialism. By the way we weren't that much better off under Clinton.
          old enough to remember
      • linux geek???

        i for one would like to think that those who work in the computer industry were intelligent persons, however you manage to point out that you for one have your head screwed firmly up where the sun don' shine. don't you ever listen to these people speak or are you enamored of the babe from wasilla so much that you have missed why she was called, on television, a 5th grade moron??
        she may not be that at all but she certainly is trying to act the part. would you really want her as the prsident of the u.s.?
        eglazier
    • Shipping Jobs Overseas makes Degrees Sucker's Bet

      Why should one risk some $100,000's worth of indebtedness to the likes of a Sallie Mae that is far better protected from bankruptcy losses than other financial institutions? If Tony Soprano owned the likes of Sallie Mae, he would be able to close down all of his other rackets and retire in gross luxury. Why can't Bill Gates realize that the so-called engineering and information technology personel shortage cannot be solved if the necessary collateral is stripped from graduates of these programs via H1-B visa abuses and off-shoring of the needed jobs.

      Back in the 50's my mother had a commercial property on St. Paul Stree in Baltimore (I'm sure Nancy Pelosi knows where this is, and, who, by the way, favors increased guest worker permits) and wished to put up an office building. Before this could be done, the banks and other financial institutions required proof of long-term lease commitments for a high percentage of available rental space in the proposed project before any funds would be lent. This was not done, and the building was not built.

      One solution would be to make the student lending industry be responsible for job availability as condition for loan payback. If this were done, Sallie Mae, instead off-shoring I/T jobs themselves would be actively lobbying to prevent government policies that would undermine probability of ability to payback loans through employment in chosen field of training.
      lcarliner@...