Analysts predict selective job cuts at EDS

by Editor 8/20/2008 4:57:00 PM

Hewlett-Packard has almost completed its $13.9 billion acquisition of the Texas-based IT services firm Electronic Data Systems Corp. Industry analysts say that the upcoming merger is both good news and bad news for EDS employees – some of whom may not get to keep their jobs at the company since workforce cuts are a usual consequence of the fallout.

“Clearly, they’re going to go through another significant head-count reduction,” says Peter Bendor-Samuel, founder of the outsourcing consulting firm Everest Group.

Big corporate acquisitions usually result in a loss of 8 – 10 percent of the workforce. In the case of EDS, this would translate into about 14,000 layoffs. Sanford Bernstein analyst Rod Bourgeois points out that EDS has already been sending some projects offshore and trimming its workforce, but “it’s clearly an acceleration, versus the trajectory EDS was on as a stand-alone.”

On the positive side, experts say, the job cuts will probably be selective ones and employees who possess the technical and sales skills that had made the company an attractive target for acquisition in the first place, are expected to stay on board.

Dane Anderson, a vice president with Gartner Inc., says that expertise in services is what had primarily prompted H-P to buy EDS and, for this reason, it would not make sense to slash a huge percentage of jobs at EDS as this would remove the value that made the company an attractive target.

Mr. Anderson singled out Charlie Feld, senior executive vice president of applications services at EDS, as one of the company’s most valuable managers, saying:

“I think he’s an integral element of this going forward. Feld was the architect of the multiyear plan for EDS. It was not only ‘How do we stop the bleeding?’ but ‘How do we modernize ourselves?’”

So far, EDS chief executive Ron Rittenmeyer has been the only top level executive to publicly say that he would stay with the company after the merger.

The merger is expected to close this month.

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