At its securities analyst meeting today, HP will unveil a strategic plan to establish a powerful position in the evolving enterprise market.

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.
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.

Vinod /ITvoir Network