HP downplays NZ redundancies

Differences between global and local operations could protect Kiwi employees

Up to 250 Kiwi employees of the combined HP-EDS could face the axe if Hewlett-Packard’s plans to lay off up to 24,600 employees globally over the next three years is mirrored in New Zealand.

But significant differences between HP’s global and New Zealand businesses could shelter local employees from the full force of the programme, according a HP spokesman and a local analyst.

The lay-offs come as part of an effort to streamline the company, following its US$13.9 billion (NZ$20.9 billion) acquisition of Electronic Data Systems, a company that is traditionally strong in the local market. They will be part of a three-year restructuring programme, HP said in a statement last week, targeting about 7.5% of its workers. Nearly half of the reductions will come from HP’s US workforce and about half the cuts will take place in 2009.

IDC senior analyst Ullrich Loeffler says the combined HP-EDS has around 3,300 employees in New Zealand, plus contractors.

Locally, those contractors could be the first target, he says.

Then overheads would be looked at, specifically duplications caused by the buyout in areas such as accounting, administration, marketing and management.

He says in core IT capabilities the effects are harder to predict. There will be some overlaps and some ability to shift capabilities from one company to the other.

“One of the key challenges for EDS is profitability,” Loeffler says. “HP is a lot more profitable. It makes sense to look for efficiencies and synergies to increase profitability.”

Asked if EDS could be expected to bear the brunt of the reduction locally, Loeffler said that proportionally in New Zealand that was where the biggest headcount is.

HP’s enterprise marketing manager in New Zealand, Jeff Healey, says the integration plan is still in its early stages, but the local operations of HP and EDS are “quite complementary”.

“There’s not a lot of overlap in customers,” he says.

Healey says HP CEO Mark Hurd’s blueprint as outlined last week indicates most of the global redundancies will come from EDS and half of those from the US in areas such as shared services.

“Given there is not a lot of that type of resource here in New Zealand, I wouldn’t apply a straight percentage to the local numbers,” he says. “We’ll be focusing on delivery to customers.”

“This is a really tough day for us,” Hurd told financial analysts in a meeting at HP’s headquarters last week. “As easy as it is to put numbers on paper ... We’ve got to go do tough stuff.”

The restructuring programme is expected to save HP about US$1.8 billion each year, Hurd said. HP will, however, take a US$1.7 billion charge in the fourth quarter of 2008 related to the restructuring. “I can assure you, we will nail this integration.”

In Australia, media reports indicate up to 460 staff could face the axe.

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