SAN FRANCISCO --
will lay off more than 24,000 workers as it integrates recently acquired technology services firm EDS into its own operations.
The job cuts, which amount to roughly 7.5% of the combined company's workforce, will result in annual cost savings of $1.8 billion, H-P said Monday in a meeting to discuss the tech firm's largest acquisition in years. Since the deal was announced, some investors have voiced concerns about whether Plano, Texas-based EDS will act as a drag on H-P's business.
H-P CEO Mark Hurd said Monday that the combination with EDS provides "a new pillar" in its business, and positions H-P to tap into an overall market opportunity he pegged at almost half a trillion dollars.
H-P said the deal would contribute to its bottom line in fiscal 2010, injecting an additional 11 cents to 16 cents to its EPS. In fiscal 2009, however, H-P expects the deal to hurt EPS by between 11 cents to 16 cents. And the company sees a hit of 17 cents to negative 19 cents hit to EDS in the fiscal fourth quarter of the current year.
The company said it still expected its adjusted EPS this quarter to range between $1.01 and $1.03, but warned that changes in currency exchange rates in the last month have put pressure on revenue. H-P had previously projected revenue in the fiscal fourth quarter between $30.1 billion and $30.3 billion.
Shares of H-P were up 37 cents at $45.70 in extended trading Monday.
H-P acquired EDS for $13.9 billion last month, making it the No. 2 player in the technology outsourcing market behind
The deal represents H-P's largest acquisition since its $24.2 billion purchase of PC maker Compaq in 2002.
While H-P has said the deal will provide various opportunities for cost savings, there has been concern on Wall Street about how good of a fit the two companies are -- particularly given EDS's low operating profit margins compared with those of H-P.
Since reports of the deal first surfaced in May, H-P's stock price has declined about 8.2%, compared to IBM's 6.9% decline in the same period. The
is down 11% in that period, including Monday's broad market selloff.
"I can assure you we will nail this integration," H-P Chief Strategy and Technology Officer Shane Robison said Monday.
Robison said a team of over 500 employees has been dedicated full time toward ensuring a smooth integration between the two organizations, with a focus on each firm's stable of customers and products, as well as opportunities for cost savings in everything from real estate to procurement costs.
With EDS folded into its operations, H-P executives said the company now has the scale to accelerate its growth in the business of helping companies manage their technology infrastructure.
H-P said Monday that it will take a charge of $1.7 billion in the fourth quarter of fiscal 2008 because of the restructuring, $1.4 billion of which will be recorded as goodwill, and $300 million of which will be recorded as a restructuring charge that will be included in H-P's GAAP financial results.
Monday's announcement of 24,600 job cuts will occur over the next three years, with nearly half of the affected jobs in the U.S.
The layoffs are significant even by H-P's standards; the company has focused on reducing costs and finding operating efficiencies under the hand of CEO Mark Hurd. Shortly after Hurd took over in 2005, the company announced plans to slash 15,000 jobs from its payroll.
H-P said Monday that it plans to replace about half of the newly cut positions over the next three years to create a workforce with the "right blend of services delivery capabilities to address the diversity of its markets and customers worldwide."