Fear grips employees as HP acquires EDS

By SiliconIndia   |   Friday, 29 August 2008, 07:12 Hrs
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Bangalore: While the talks of HP acquiring Plano-based Electronic Data Systems (EDS) have reached the culmination with the companies finally striking this $13.9 billion deal, the employees of the latter are gripped by nightmares of losing their jobs. As per Everest Group, a Dallas outsourcing consulting firm, large buyouts tend to take toll on the jobs of around eight to 10 percent of the employees, which imply around 14,000 jobs in this case, though Indian employees have less to fear.

Indian employees will be benefited by the relocation of jobs which is on the list of HP, and it will result in the shifting of around 10,000 jobs. Eric Simonson, Managing Principal, Everest Research Institute said "We expect significant percentage of jobs related to delivery moving offshore, primarily to India, which is one of the key delivery locations already for both HP and EDS. There would be significant increases in job in India all because of the increase in growth potential in the entity and the approach to move existing jobs within the entity to offshore locations."

But Simpson also tries to pacify the fear of losing out on jobs as it said, "There will be overhead cuts for duplication of headcounts, both within EDS in Texas and HP in California. But then, net of that, a lot of delivery jobs and other functions will be coming offshore."

The deal makes HP the second-largest player behind IBM, and it is HP's largest acquisition since it acquired Compaq for $20 billion six years ago. Chief Executive Officer Mark Hurd will use EDS to more than double revenue from services, which are more profitable than PCs. The operating margin for Hewlett-Packard's services unit, or operating profit as a percentage of sales, equaled 12.1 percent last quarter, more than twice that of the PC division. Ron Rittenmeyer, the former CEO, president and chairman of EDS, will head up the group from EDS' former headquarters in Plano, Texas.

However, with the deal two top executives shall opt out as Jeff Heller, EDS vice chairman, is retiring along with Charlie Feld, senior executive vice president of applications services, although both he and Heller will stay through a short transition period.

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