Compaq's acquisition of Digital has been narrowly approved by the latter company's shareholders, but extensive fallout is anticipated as up to 17,000 jobs are expected to be axed worldwide from the combined firm.
Following a 72 per cent vote in favour of the acquisition by holders of Digital outstanding common stock, Compaq disclosed that it would cut 2,000 jobs - about six per cent of its workforce - in addition to the 15,000 at Digital announced earlier this year. An additional 2,000 employees were transferred from the Digital semiconductor division to Intel in accordance with last year's Alpha agreement.
According to Compaq CEO Eckhard Pfeiffer, there will be an estimated total reduction to around 67,000 personnel worldwide from around 86,000.
A minimum of 66.7 per cent of votes was required for the deal to go through, from which each shareholder will receive $30 a share in cash and 0.9 Compaq shares for each Digital share. Digital shares ceased trading at market close on 11 June, after the firm's last AGM as an independent company.
The purchase was originally announced in January (PC Dealer, 28 January).
In a further blow, Pfeiffer revealed that the Digital name will now disappear from existence. A massive advertising campaign in the UK national press heralding the acquisition excluded the Digital brand.
Digital CEO Robert Palmer will be leaving next month. He was reported to have been awarded a 'golden parachute' of up to $6.5 million once the acquisition is completed on 16 June, plus up to 776,045 shares of Digital stock, estimated to be worth up to about $45 million.
According to its post-acquisition statement, Compaq said it will be hit by charges during the second quarter as a result of scrapping duplicated facilities, redundancies and writing off purchased in-process technology.
Compaq's statement also issued a warning that the third quarter will be transitional as the company focuses on integrating Digital.
Compaq discussed its plans for its foray into the services market - a move only made possible since the Digital acquisition.
According to John Landau, Compaq senior VP and general manager for services, the vendor hopes to have a $15 billion services operation by the year 2002 and will focus on network and systems integration, operations management, and support and availability.
COMPAQ UK CUTS
Compaq will cut around 25 per cent of UK jobs over the next year, with the vendor's employees competing directly with their opposite numbers in Digital.
The majority of jobs will go in the middle management and hardware areas of the recently merged manufacturers. About 1,000 jobs are under threat, and employees - including upper management - will be expected to re-apply for jobs.
Hardware jobs are likely to go due to product overlap, such as Digital notebooks, which insiders feel will be of little interest to Compaq. One industry source commented: 'I wouldn't like to be a PC product marketing manager at this time in the company.'
Another source said: 'Staff at Compaq feel more comfortable than those at Digital.' He added that Compaq's reputation was more mercenary, compared to Digital, known for previously offering employee incentives such as reduced price share schemes for long-term loyalty.
Insiders agreed that Digital's services side will escape relatively unscathed.
Paul Gardner, Compaq's director of customer services, admitted that situations where two employees were applying for the same job would arise 'from senior management upwards', but refused to comment on specific job cuts.
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