By Eric Auchard
SAN FRANCISCO (Reuters) – Hewlett-Packard Co (HPQ) 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 would 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.
"We are good at integrating companies … I believe we will do it well," HP Chairman and Chief Executive Mark Hurd told financial analysts at the company’s headquarters.
Hurd was referring to the company’s 2002 mega-merger of HP and Compaq Computer and a succession of software deals HP has made in recent years to bolster its business helping automate how companies manage their networks and systems.
The $13.2 billion acquisition of EDS, a deal announced in May and closed in August, made HP the world’s second largest provider of technology services, up from No. 5 previously.
Rival IBM (IBM) is No. 1 in computer services, and HP’s strategy takes aim at this dominance.
The deal bolsters HP’s business in the United States and Britain, two strong markets for EDS, both among commercial clients and in government agencies.
EDS also gives HP the No. 1 position in "applications management" — providing maintenance and outsourced management of older software systems. EDS was founded in 1962 by ex-IBM salesman H. Ross Perot, who helped pioneer the market for outsourced computer operations and other technical services.
HP said it would 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.