Consolidation and retrenchment in the computer industry are continuing apace, as demonstrated by the merger of Hewlett Packard and Compaq. Together, the two companies hope to create a new force in the market with a combined organisation of some 150,000 employees and annual sales close to $90 billion. However, the short-term impetus for the merger is pressure to reduce costs and this will mean job cuts internationally including, almost certainly, in Ireland, where the companies together employ 4,000 people. It is yet another sign of the impact of the international technology downturn - and it is not likely to be the last.
The two companies were making optimistic statements yesterday, although the financial markets took the view that the merger was risky. There is no doubt that cost reductions are central to the merger plan - designed to save $2.5 billion annually by 2004. Hewlett Packard's chief executive, Ms Carly Fiorina, referred to the potential for "significant cost structure improvements". Interpreting this, one analyst commented: "You do it by sacking people."
It will be some time before the implications for the Irish operations become clear. There is a limited amount of direct overlap between the Hewlett Packard and Compaq plants here, leaving the IDA confident that job losses will be limited.
However, the company is cutting more than 15,000 jobs internationally and the future of their main manufacturing operations in the Republic will be determined by their overall plans for the European market. Meanwhile, sales, administration and support operations in Ireland - and every other market - are certain to be consolidated, leading to job losses in this area.
It is just the latest bad news in a sector which has been hit by a string of redundancies and closures. These have been caused by a collapse in demand - partly caused by the US economic downturn - and are also a legacy of a period of over-investment. Caught up in the hype of dot.com mania, many tech companies engaged in hugely extravagant expansion programmes, meaning that excess capacity has coincided with falling orders from customers.
There can be no doubt that the scale of the job losses in the industry in recent months has come as a surprise to the Government and to IDA Ireland. In recent years, the IDA has attracted a range of technology industry leaders to the Republic. The spread and depth of this investment - and the development of indigenous firms - means that the sector should remain a significant contributor to the economy in the long term. However, it is increasingly clear that significant difficulties lie ahead.