Monday, September 15, 2008
Hewlett-Packard Co., the world's largest maker of personal computers, plans to eliminate about 24,600 jobs over three years as part of its integration of Electronic Data Systems Corp.
The reduction amounts to about 7.5 percent of the workforce, Hewlett-Packard said today in a statement. It expects to incur $1.7 billion in costs this quarter for the cuts. Hewlett-Packard and EDS have about 320,000 employees combined.
Chief Executive Officer Mark Hurd paid $13.2 billion for EDS to more than double revenue at its services group, which manages corporate computer networks and data centers. Combined, the companies' service units had more than $38 billion in sales last year. The cuts are the biggest undertaken by Hurd, who eliminated 15,000 positions to revive profit after becoming as CEO in 2005.
``A headcount reduction over a multiyear period makes sense,'' said Michael Cuggino, who manages about $3.8 billion at Pacific Heights Asset Management in San Francisco, including 370,000 Hewlett-Packard shares. ``As a shareholder I'm happy to see it. It shows they are executing the plan they put out there.''
Hewlett-Packard gained as much as 42 cents to $45.75 in after-hours trading after dropping $1.64 to $45.33 at 4 p.m. in New York Stock Exchange trading. The shares have fallen 10 percent this year.
Half the job cuts will be in the U.S., Palo Alto, California-based Hewlett-Packard said. The company will begin telling employees soon if their position will be eliminated.
Once completed, the restructuring is expected to bring savings of $1.8 billion annually, excluding costs spent to expand its sales force and reach in emerging markets. the company said. It is also looking at ways to save money on real estate, procurement and information technology spending.
Hewlett-Packard completed its acquisition last month of Plano, Texas-based EDS, which was founded in 1962 by H. Ross Perot. The purchase is Hewlett-Packard's largest since the $18.9 billion takeover of Compaq Computer Corp. in 2002.