Hewlett-Packard's move to cut 24,600 jobs as part of its integration with EDS, the Plano, Texas-based systems integrator, initially surprised HP partners by the depth of the layoffs, but partners say the action may strengthen HP, particularly as it competes with IBM Global Services.
Mark Hurd, HP chairman and CEO, on Monday said the cutbacks and integration of EDS will improve HP's market postion. "HP has a strong track record of making acquisitions and integrating them to capture leading market positions," Hurd said. "We will deliver on the promise of HP and EDS for our customers and shareholders."
After some intial shock at Hurd's announcement, HP partners said they are looking forward to a stronger HP. Brett Anderson, consulting services manager at HP partner Logicalis, a Bloomfield Hills, Mich.-based solution provider, said he thought there would be some layoffs as the companies were brought together. "But to think there was that much overlap to require cutting that many people," Anderson said. "EDS was never known as being a lean organization."
Anderson said HP's acquisition of EDS allows the vendor to expand its services offerings beyond its traditional HP-related solutions and focus more on consulting.
For Logicalis, the planned layoffs should not have too much impact, Anderson said. "We're not engaging HP's professional services often," he said. "We have our own professional services, and are more nimble than HP. We only engage them for low-end services, or for high-end Superdome or XP storage services."
Larry Gross, business development executive at Technology Integration Group, a San Diego-based HP solution provider, said he is excited that HP is acquiring EDS, calling it a brilliant move by a vendor which needs to have a good professional services arm.
Gross said he is not surprised by the layoff, and that it could actually benefit the channel.
"HP hasn't talked to us about it yet, but we're sure it's coming," he said. "I'm hoping HP won't break apart what EDS was great at. Their customer support was second to none."
Rich Baldwin, president and CEO of Nth Generation Computing, a San Diego-based HP solution provider, said that consolidation is what mergers are all about.
Baldwin said that HP was smart to acquire EDS. "Hooray to [HP Chairman and CEO] Mark Hurd for taking the big step," he said. "Now they're in the same league as IBM Global Services. HP's consulting and integration business needed it."
On Monday, Chief Financial Officer Cathie Lesjak told analysts that the integration of EDS into HP will cut into HP's net profits in its current fourth quarter ending in October and the 2009 fiscal year before turning positive during 2010, Reuters reported.
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, as well as excess office space.
The CFO said the company's previous forecast for investors to expect a fourth-quarter net profit of 95 cents to 97 cents per share on revenue around $30.2-$30.3 billion, Reuters reported.