Digital will lose 15,000 jobs as a result of the Compaq takeover, according to sources close to the company in the US.
The figure represents a 50% increase on the 10,000 job losses estimated by Compaq following the takeover announcement in January. Compaq recently posted disappointing financial results, with profits down to $16 million (#9.6 million) including acquisition charges, a 96% drop on last year.
The results mean Compaq must send tougher signals to its shareholders and the market, according to Mark Raphael, industry analyst with the Meta Group.
"Compaq is well aware that it is stretching itself with this takeover and has to calm the market by showing that it can create a lean company and not be sentimental (about job losses)," he explained. "Compaq will want to keep most of Digital's sales and technical people but (many of) the product managers and administrative staff are superfluous."
The job losses will be mainly in manufacturing, said Mike Winkler, Compaq senior vice president of PC products. No jobs will be lost in services, the arm of Digital most coveted by Compaq. He refused to say how many staff would go at Digital's manufacturing plant in Scotland.
Compaq will also take a charge of between $1.5 billion (#0.9 billion) and $2 billion (#1.2 billion) as a result of "duplication of facilities and people". "There will be some reduction in workforce and a cost associated with that," a spokesman said.
Details on job losses and product lines will be released after the deal is finalised at a shareholders meeting on 11 June this year, he added.
Meta Group's Raphael has no doubt that the deal will go through and said that Digital's Open VMS and Unix technology would be the long-term victims of the takeover as Compaq focuses on its scalable NT servers.
Digital currently employs around 53,300 staff worldwide compared to over 130,000 in the 1980s. Raphael predicted that job cuts would continue long after the period following the takeover and expects another 5,000 to 10,000 redundancies over the next few years.
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