A month after IBM struck a
$3.5 billion stock-and-cash deal to buy PricewterhouseCoopers’ consulting
unit, the reverberations are being felt at Big Blue.
On Tuesday, IBM was reportedly preparing to cut 4,000 jobs
after the merger goes through, while rival HP will abandon
its alliance with PwC now that its part of the IBM fold.
The Wall Street Journal reported that the layoffs would come from the
combined consulting operations at IBM, which has 50,000 workers in its
Business Innovation Services unit. PwC Consulting will add another 30,000
employees, making the layoffs about 5 percent of the combined consulting
units.
The Journal said most of the layoffs would come from redundant
support staff. The acquisition is expected to close at the end of the month.
The layoffs would come as no surprise on the heels of the acquisition, which
was hurried along by PricewaterhouseCoopers’ desire to untangle its
consulting and auditing businesses in the wake of the accounting scandals
sweeping corporate America.
The market for computer services has remained
sluggish, with researcher Giga Information Group recently reporting
spending on IT services would remain flat this year after incremental growth
in 2001. Services and outsourcing powered the technology-spending boom in
1999 and 2000, growing at a 20 percent clip.
Last month, IBM, which has the largest computer services practice in the
industry, reported its global services revenue fell for the third straight
quarter. No. 2 computer services company EDS has forecast revenue will only
inch up in the third quarter compared to last year.
When IBM swallows PwC at the end of the month, PwC’s relationship with HP
will most likely be over. According to a Dow Jones Newswires report, HP
plans to end its alliance on the grounds that IBM is its top competitor in
everything from PCs to IT consulting. A company executive said HP would
complete current projects with PwC, but would not take on any new business
with PwC.
HP’s recently closed acquisition of Compaq grew its services businesses
greatly. The alliance with PwC would be the second partnership the company
has moved to sever due to competition concerns in the wake of the merger.
In July, HP said it would end it
reseller agreement with Dell, on the grounds that the computer maker was
widely expected to enter the $5.8 billion printer business, in which HP
rules the roost.
