Outsource Magazine

As Hewlett Packard's merger with EDS gains shareholder approval, the firms have denied reports that they plan to lay off 20% of its US staff, saying they are "completely factually incorrect."

HP agreed to acquire EDS in May for $13.9 billion. The transaction, which valued EDS at $25 per share, is expected to close in the second half of 2008.The European Commission last week gave the deal its approval as did the EDS shareholders.

HP has said it plans to create a new business unit that will house EDS's operations and be led by current EDS CEO Ron Rittenmeyer, who will report directly to HP CEO Mark Hurd. The new unit will go to market under the name "EDS -- an HP company” and will emloy 210,000 employees. The combined services revenue for EDS and HP last year was $38 billion, compared with $54 billion for Big Blue.

Ironically EDS is going out on a high. “In the midst of all the merger-related news, EDS delivered a decent second quarter, despite a dip in its Americas-based business,” noted Ovum's John Madden. “Net income was $160 million compared to $138 million in the quarter a year ago, with $5.4 billion in quarterly contract signings, a 27% year-on-year increase, and a strong performance in financial services, government and EMEA-based contracts.

“In  EMEA, EDS reported quarterly revenues of $1.89 billion, up 3% from a year ago, with a rise in quarterly operating profits from $272 million to $293 million while the Asia-Pacific business reported $558 million in revenues, an 11% rise year-on-year, thanks to increased revenues from EDS's India-based business and overall contract performance in Australia and New Zealand.

“The fact that the company reported a strong contract pipeline, even with the HP acquisition a near-done deal, shows that customers are not shying away from working with EDS in the face of potential changes. But we also know that other customers are curious to see how HP leverages EDS's strengths - especially in the area of infrastructure outsourcing and application services - going forward.”