HP further integrates EDS; Rittenmeyer to retire

Hewlett-Packard will absorb EDS into its Technology Solutions Group and Ron Rittenmeyer, the CEO of the recently acquired IT services firm, will retire Dec. 31.

The moves--announced Friday--show that HP's integration of EDS occurring pretty quickly. Initially, HP allowed EDS to be run separately from its technology solutions group, but that structure didn't last long. With Rittenmeyer out, HP has consolidated its services unit under Ann Livermore.

In a statement, HP said:

The new organizational structure will allow HP to sell and deliver more integrated solutions for its customers. In addition, this organizational change is expected to allow HP to continue to quickly realize its revenue growth and cost-efficiency goals for EDS.

Translation: HP plans to eliminate redundant operations quickly. Joe Eazor will become senior vice president of EDS and report to Livermore. Eazor is currently the senior vice president of transformation at HP and is in charge of the EDS integration.

At its analyst meeting in September, HP detailed plans to cut 25,000 positions as part of the EDS integration.

According to Wall Street analysts HP's EDS integration is on track. Thomas Weisel analyst Doug Reid wrote in a research note last week following meeting with HP:

Management reiterated that head count reductions and implementation of a more efficient IT infrastructure remains on track. Specifically, HPQ has eliminated 2300 positions at EDS within the first two months of the close of the acquisitions, suggesting EDS-related cost reductions are tracking at or slightly ahead of schedule in the company's efforts to reduce 12,300 heads from EDS in FY09. We believe the positions that were reduced were either redundant or general and administrative positions which do not require re-hiring in best shore locations and thus represents what are some of the lower risk headcount reductions planned. Additionally, management noted that EDS' pipeline of potential outsourcing deals has increased, partially due to the counter-cyclicality of outsourcing and partially due to the increased brand value HP brings to the EDS name. While conversion of engagements to contracts remains to be seen, we view the increased pipeline as an incremental positive.

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