Hewlett-Packard Co. (NYSE: HPQ) has announced that it will “invest” $1 billion in its Enterprise Services business by taking a charge of $1 billion over several years to cut 9,000 jobs. That’s one way of looking at layoffs. HP spent $13.9 billion in 2008 to acquire EDS, putting the company in a position to challenge IBM Corp. (NYSE: IBM) in the IT services business. Since then, IBM has widened its offerings in services, Oracle Corp. (NASDAQ: ORCL) has swallowed up Sun Microsystems, and SAP AG
(NYSE: SAP) recently announced that it would pay $5.8 billion for Sybase Inc. (NYSE: SY). The common thread in all this is that scale and diversity are required to compete successfully.
HP has, so far, done a pretty good job of integrating EDS into its operations. That is what it plans to sell to customers with its Converged Infrastructure services. The company says it has mostly finished its integration of EDS and that it has “identified significant opportunities to grow and scale the business.”
The company will consolidate and fully automate its commercial data centers and many of the functions those data centers provide. HP expects substantial productivity gains from this consolidation and plans to cut about 9,000 jobs over a “multiyear period to reinvest for further growth and to increase shareholder value.”
HP anticipates gross annualized savings of $1 billion when the firings are completed. HP also expects net savings of $500-$700 million after spending the $1 billion it saves from firing 9,000 people. The company also expects to hire an additional 6,000 global sales and delivery staff.
The company expects to post about half the $1 billion charge by the end of its current fiscal year in October 2010.
HP shares are down less than 1% in early trading this morning.
