With the acquisition of EDS, HP has the industry’s most comprehensive portfolio of IT solutions to help customers manage and transform their technology environments. The company also will announce plans to restructure the EDS business group to streamline costs, invest in growth and drive shareholder value.
Enterprises are facing an explosion of digital content, aging infrastructure and constrained resources. Consequently, chief information officers must rethink their technology environments and choose to manage it themselves, outsource it or receive services through the cloud. With EDS, HP is a leading globally scaled service provider that combines innovation, a stronger product portfolio and expanded service delivery capabilities.
“HP now has the broadest technology capabilities in the market to meet customer needs today and in the future,” said Mark Hurd, HP chairman and chief executive officer. “HP has a strong track record of making acquisitions and integrating them to capture leading market positions. We will deliver on the promise of HP and EDS for our customers and shareholders.”
Streamlining for growth
HP intends to implement a restructuring program for the EDS business group that will better align the combined company’s overall structure and efficiency with the operating model that HP has successfully implemented in recent years. In addition to making changes to its global workforce to better serve its services customers, HP has identified synergies in corporate overhead functions, such as real estate, IT and procurement.
The restructuring program will take place over three years and includes a workforce reduction that will streamline the combined company’s services businesses. Workforce reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate. Approximately 7.5 percent of the combined company’s workforce, or about 24,600 employees, will be affected over the course of the program, with nearly half of the reductions occurring in the United States. HP will provide employees affected by this restructuring program with severance packages, counseling and job placement services.
HP expects to replace roughly half of these positions over the next three years to create a global workforce that has the right blend of services delivery capabilities to address the diversity of its markets and customers worldwide.
Financial impact
Once completed, the restructuring program is expected to result in annual cost savings of approximately $1.8 billion. These savings are net of reinvestments in areas including sales coverage, delivery optimization and emerging markets.
HP will be recording a charge of $1.7 billion in the fourth quarter of fiscal 2008 relating to the restructuring program, $1.4 billion of which will be recorded as goodwill and $0.3 billion of which will be recorded as a restructuring charge that will be included in HP’s GAAP financial results.
A webcast of today’s securities analyst meeting, which begins at 5 p.m. ET / 2 p.m. PT, will be available at http://www.hp.com/investor/focusSAM2008. A replay of the webcast will be available at the same URL.
About HP
HP, the world’s largest technology company, provides printing and personal computing products and IT services, software and solutions that simplify the technology experience for consumers and businesses. HP completed its acquisition of EDS on Aug. 26, 2008. More information about HP is available at http://www.hp.com/.
Forward-looking statements
This news release contains forward-looking statements that involve
risks, uncertainties and assumptions. If the risks or uncertainties ever
materialize or the assumptions prove incorrect, the results of HP may
differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any projections
of revenue, margins, expenses, earnings, tax provisions, cash flows,
benefit obligations, share repurchases, acquisition synergies or other
financial items; any statements of the plans, strategies and objectives
of management for future operations, including execution of cost
reduction programs and restructuring and integration plans; any
statements concerning the expected development, performance or market
share relating to products or services; any statements regarding pending
investigations, claims or disputes; any statements of expectation or
belief; and any statements of assumptions underlying any of the
foregoing. Risks, uncertainties and assumptions include macroeconomic
and geopolitical trends and events; execution and performance of
contracts by suppliers, customers and partners; the challenge of
managing asset levels, including inventory; the difficulty of aligning
expense levels with revenue changes; assumptions related to pension and
other post-retirement costs; expectations and assumptions relating to
the execution and timing of cost reduction programs and restructuring
and integration plans; the possibility that the expected benefits of
business combination transactions may not materialize as expected; the
resolution of pending investigations, claims and disputes; and other
risks that are described in HP ’ s Annual
Report on Form 10-K for the fiscal year ended October 31, 2007 and HP ’ s
other filings with the Securities and Exchange Commission, including HP ’ s
Quarterly Report on Form 10-Q for the fiscal quarter ended July 31,
2008. HP assumes no obligation and does not intend to update these
forward-looking statements.
