HP-EDS slips into red with first combined result

EDS, 12 months to October 2008
Revenue: $390 million
Net profit: $41.7 million

HP, 12-months to October 2008
Revenue: $601 million
Net profit: $27.42 million

HP + EDS, 12 months to October 2008 (trading as standalone companies)
Combined revenue: $991 million
Combined net profit: $69.12 million

HP, 12-months to October 2009
Revenue: $538 million
Net profit: ($8.86 million)

HP (including EDS), 12-months to October 2010
Revenue: $817 million
Net profit: ($10.34 million)

In its first result filed with the Companies Office since taking over EDS, for the 12 months to October 2010, Hewlett Packard New Zealand's loss has widened to $10.34 million.

HP lost $8.86 million in 2009 but now includes EDS, which made a fat profit of $41.7 million in 2008, the final year it submitted accounts.

For now, with the continuing economic slowdown and the cost of redundancies, the whole is less than the sum of the parts. Combined 2008 revenue of $991 million has shunk to $817 million, while combined profit of $69.12 million has evaporated (see table above).

In 2008, HP bought EDS for $US13.9 billion in a bid to expand its services business. HP New Zealand  paid $363.5 miillion for EDS New Zealand, facilitated in part by a $187 million loan from its US parent.

When the two companies merged their local operations, in August 2009, they said they had created New Zealand's largest IT services operation - which would have put staff at around 2900 (to put it ahead of Telecom's Gen-i division).

Although HP New Zealand never comments on its local result, the company trimmed staff worldwide in two rounds of cuts; one after the EDS takeover, another to cut costs as the recession bit. Management and other salaries were also trimmed at the height of the downturn.

Indications are that HP-EDS NZ has shed several hundred staff.

Walking off the Farm
In August 2009, HP said around 234 jobs would be lost as the two companies consolidated their local operations over the next two to three years.

This target has appeared to have been achieved.

HP NZ's cost of wages 2010 was $167.3 million, compared to the combined HP-EDS bill of $205.7 million for 2008.

As first reported by NBR's Chris Hutching on April 6, HP has quit its office at Smales Farm on Auckland's North Shore, where it was anchor tenant in one of two buildings owned by TelstraClear.

The office space - originally leased by EDS - is listed as suitable for 200 to 300 staff, depending on configuration.

HP is not leasing space in any alternative location. The company's main office is on Auckland's Viaduct.

HP recently announced plans to build a $60 million datacentre in Tuakau, south of Auckland, which will compete against an $80 million data centre recently opened by rival IBM; an $80 million facility in the works from Fujitsu, and a programme by Gen-i to utilise Telecom exchanges as data centres.