HP and EDS: Let the Layoffs Begin? (updates in the comments)

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As HP inches closer to sealing its deal to acquire EDS, rumor has it that executives at EDS may be putting the finishing touches on severance packages for a significant number of its staff.

An EDS employee told CIO.com that, within the walls of the Dallas-based IT services provider, the rumor is that the company plans to lay off 20 percent of its Americas-based workforce tomorrow. EDS's director of corporate public relations adamantly denies any immediate workforce reduction, saying that any information about plans to pink-slip that many employees tomorrow is "completely factually inaccurate." *

It's been just over two months since HP announced its plans to purchase EDS for more than $13 billion. In the last few days, the European Commission approved the union, and HP and EDS announced that they'd settled shareholder litigation related to their potential merger. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 relating to the deal expired without a request for further information by the U.S. Department of Justice or Federal Trade Commission last month. And EDS stockholders are scheduled to vote on the transaction tomorrow.

EDS employees may not be the only ones distressed by the seeming certainty of the HP-EDS hook-up. Although most analysts and consultants still contend that a combined HP-EDS will be beneficial for most customers, there is one big user who’s taking the news harder than the rest. GM CIO Ralph Szygenda is smarting, one IT consultant who recently spent some time with Szygenda tells me. The long-time auto industry CIO who marketed his multi-sourced IT services environment as the "third wave of outsourcing" will find his IT services provider significantly less diversified once the marriage of HP and EDS is official. The Szygenda strategy, having a multitude of outsourcers cooperating -- and competing -- to deliver IT services at a lower cost, is will be set back several years due to the HP-EDS deal, says the consultant.

* This post was updated to reflect the additional comments from EDS.


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