Last week HP announced a plan to layoff about 24,600 people, mostly from among the 137,000 employees acquired with their $14 billion dollar EDS acquisition.
That may sound like only about 18%, but in fact EDS had about 47,000 U.S. employees and because that's where most of the layoffs are going to happen the real cull is closer to 50%.
Although Novell probably has the worst record in our industry of destroying merger partners - from Cambridge Partners to Platespin what they touch is soon gone or, like SuSe, demoted from leading edge to trailing edge - the general trend in IT suggests that larger mergers and acquisitions other than those driven by the technology developers generally precede financial and market losses.
When HP acquired Compaq, HP disappeared; When IBM acquired Monday (aka PriceWaterhouseCoopers Consulting) four billion dollars and roughly 80% of PWCC's 30,000 people disappeared; when Sun's acquisition stripped StorageTek of its faux IBM label, four billion dollars in shareholder equity disappeared and its customers threw the corporate remnants under the bus.
And the current layoffs announcement from HP? The start of that process for the people who work at EDS - the squeal of brakes you hear just before two garbage trucks collide.
It seems to me that there are three critical sets of reasons these things fail:
In the end it comes down, I think, to a sad reality: big acquisitions are like big out sourcing deals: characteristic of executives who don't know how to run what they've got and who will double down, as the glow of money, wine, flattery, and hot press releases surrounding the takeover battle fades away, on strategies they should have dropped years earlier.
HP, for example, appears to be
betting on the nineties - planning,
to turn American
EDS survivors into sales people for new hires overseas while laying off their own future customers
and implicitly betting against the dollar, against an American economic recovery, and ultimately against
their own shareholders.
Paul Murphy wrote and published The Unix Guide to Defenestration. Murphy is a 25-year veteran of the I.T. consulting industry, specializing in Unix and Unix-related management issues.