It is uncertain whether there will be redundancies from the 1,100 workforce at Digital Ireland, following the approval of its sale to Compaq Computer, the world's largest computer manufacturer, for $9.6 billion (£6.87 billion). Announcing the closure of the deal, Compaq chief executive officer Mr Eckhard Pfeiffer said he plans to cut about 15,000 jobs across the two companies, the majority of which will be Digital employees.
Spokesmen for Digital and Compaq in Ireland say they have no further information at the moment, with all company communications stemming directly from Compaq in the US.
Speaking at a global teleconference yesterday, Mr Pfeiffer said Compaq would rationalise all of its worldwide manufacturing, including personal computer products. However he refused to be drawn on the exact nature of these changes, saying there would be further announcements about the worldwide manufacturing arm over coming weeks.
He revealed that there are no plans to lay off "customer facing-employees", generally those working in the computer services. Industry analysts are speculating the bulk of the Digital jobs will be lost in New England. Early indications were the layoffs would be immediate, but now it seems more likely that they will be stretched over six months.
Digital Ireland employs 1,100 people between Dublin and its European software centre in Galway where three divisions focus on software development, software business and multilingual tele-marketing. Compaq, which sources in excess of 350 million computer parts here every year, located its European customer support centre in Dublin last year. It already employs 400 people and has said it plans to target 550 by the end of 1998.
The acquisition has been an attractive one for Digital shareholders, as it comprised an issuance of about $4.5 billion in cash and about 141 million shares of Compaq stock, based on an exchange rate of $30 in cash and 0.945 shares of Compaq stock for each common share of Digital.
Since Compaq announced the merger in January, Mr Pfeiffer has gradually taken a larger role in overseeing Digital's operations, and has communicated regularly with employees to prepare them for the transition. Digital chief executive, Mr Robert Palmer, who is leaving in July with a reported $6.5 million severance package, has maintained a very low-profile since the takeover.
Compaq is the world's biggest PC maker, but recently it decided to target faster growing and more profitable areas of the computer markets. Digital represented the ideal choice for Compaq, providing it with a major share of the market for more powerful business machines and of the servicing business for major companies worldwide.
Mr Pfeiffer expects the company to break even in the second quarter and further restructuring moves should return it to profitability by the fourth quarter. Combined, Compaq, Digital and Tandem - a Compaq subsidiary specialising in enterprise servers -employ about 85,000 people worldwide. Analysts are predicting Compaq's restructuring charges could be as high as $2 billion.
