HP to Cut 24,600 Jobs Takes $1.7 Billion EDS Charge

 
 
By Reuters -  |  Posted 2008-09-15
 
 
 

SAN FRANCISCO (Reuters) - Hewlett-Packard Co plans to cut 7.5 percent of its work force, or 24,600 jobs, seeking to realize savings from its recent acquisition of Electronic Data Systems Corp, the company said on Monday.

HP said it will carry out the cutbacks over the next three years, while replacing about half the jobs in new areas of its services business. It announced the plan ahead of a meeting with Wall Street analysts to detail the merger plans.

Nearly half of the job reductions will take place in the United States, the Palo Alto, California-based company said. EDS was headquartered in Plano, Texas, near Dallas.

HP said it will take a charge of $1.7 billion in the fiscal fourth quarter ending in October. Accounting for goodwill will cost $1.4 billion, while cost of the restructuring will involve anther $300 million.

HP estimated $1.8 billion in annual cost savings once the three-year cost-cutting program is completed.

"We are good at integrating companies ... I believe we will do it well," Chairman and Chief Executive Mark Hurd told financial analysts at the company's headquarters.

At the time the $13.2 billion merger of computer services provider EDS into HP was announced in May, Hewlett-Packard counted 178,000 employees on its books and EDS had 142,000 employees.

Including the value of common stock, options and restricted stock units, the enterprise value of the deal totals $13.9 billion. The deal closed last month.

Hewlett-Packard said the vast majority of the cuts would focus on eliminating overlapping jobs at EDS in corporate functions such as legal, accounting, information technology and human resources.

Work-force reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, HP said. The company will provide employees affected by this restructuring program with severance packages, counseling and job placement services.

(Reporting by Eric Auchard, editing by Richard Chang, Gary Hill)