HP/Compaq Merger Could Mean More Overseas Layoffs

Hewlett-Packard's buyout of Compaq Computer could result in more job cuts in Europe, the Middle East and Africa's PC industry, experts said Tuesday.

Combined, the two computer giants have 158,600 employees in 160 business operations worldwide, including more than 44,000 in Europe, the Middle East and Africa.

From research and development engineers to support staff fielding sales calls, a number of positions at the combined company could be shed in the aftermath of the merger.

In a statement late Monday, the companies said that beginning next year the newly merged entity would result in annualized savings of $2.5 billion as it is restructured around four business units: imaging and printing, access devices, IT infrastructure including sales of computer servers and storage devices and business consulting.

The companies are expected to provide a more detailed blueprint for which business operations would be affected in the $25 billion merger.

"If you're talking about $2.5 billion in cost-saving synergies, how do you do it?" said Ian Wesley, director of Ovum Evaluates, a London-based analysis firm for the PC industry. "You do it by sacking people."

The companies say the projected savings will result from combining efforts in a number of areas, including manufacturing and marketing.

"We can create substantial shareholder value through significant cost structure improvements," Carly Fiorina, the 46-year-old HP chairman and CEO, who will hold the same position at the newly merged company, said in a statement.

The PC industry has already seen its fair share of layoffs this year. The largest PC makers, including HP, Compaq, IBM and Gateway, have shed tens of thousands of staff over the past year in response to vicious price wars and sagging demand.

In Europe, Compaq and HP rely on many of the same vendors to sell PCs and peripherals to their core market of business customers, said Gartner Group analyst Brian Grummage. He called the acquisition "a defensive move" meant to address declining margins in the PC industry by stripping out redundant costs, such as eliminating identical positions and vendor contracts.

The combined companies are a force in Europe's computer hardware market, accounting for 25.8 percent of all shipments sold in the first half of 2001, Grummage adds.

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