DXC Technology Reports First Profits After Laying Off Hundreds of Workers

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Virginia-based IT Company Cuts Jobs Within 90 Days of Launch

Newly-formed DXC Technology Co has quietly closed dozen of facilities and laid off hundreds of workers within months of its launch. The Virginia-based IT and consulting services company formed from the merger of Hewlett Packard Enterprise Co’s “Enterprise Services” division  and Computer Sciences Corporation has just revealed its massive restructuring initiative.

DXC was formed from the merger in April, and just over three months later, DXC Chairman and CEO Mike Lawrie confirmed that the company has gotten rid of four layers in its management hierarchy. Like he says, removing that many layers of management in just 90 days is “not a small deal.”

Lawrie was speaking to Wall Street analysts in the company’s first earnings call since its inception. He revealed that DXC has laid off 40% of its senior level management, including vice presidents and directors, as part of its mass restructuring plan.

DXC’s reorganization initiative has affected its delivery and support staff. Within the delivery organizational structure, the company has narrowed the management chain from 11 layers to seven. Within the support structure, the company has trimmed 10 layers down to six.

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Overall, the company  managed to have $60.0 million in net savings from the downsizing efforts. CFO Paul Saleh also hinted in the earnings call that more layoffs could follow as the company replaces its older employees with younger talent.

The removal of so many layers of management has increased the number of employees reporting to each remaining manager. In fact, the CFO confirmed that hierarchical control has increased by 20% throughout the company, which employs a global workforce of about 170,000 employees.

Moreover, the company has shuttered as many as 58 underutilized facilities in order to cut costs. An additional 31 facilities are being consolidated in big cities in order to streamline the company’s operations.

The closures have led to a decrease in the company’s real estate footprint by seven percent and have  generated about $25.0 million in cost savings through the quarter.

DXC’s management confirmed in the earnings call that the company has saved $140.0 million in costs since its inception in April. This is primarily the reason why DXC has managed to deliver a profit in its first quarter of operations, despite the fact that its two parent companies were collectively reporting net losses prior to the merger.

By the end of its first full year of existence, DXC Technology is expecting to achieve $1.0 billion in cost savings.

Sources

DXC Delivers Solid First Quarter Results with EPS Growth, EBIT Margin Expansion and Adjusted Free Cash Flow Growth,” DXC Technology, August 8, 2017.

DXC Technology (DXC) Q1 2018 Results – Earnings Call Transcript,” Seeking Alpha, August 8, 2017.

Company Overview,” DXC Technology Co, last accessed August 9, 2017.

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