HP completes US$13.9bn acquisition of EDS

27 Aug 2008

Technology giant HP has completed its US$13.9bn acquisition of services and outsourcing company EDS, the largest acquisition in the IT services sector and the second largest in the technology industry.

The companies’ collective services businesses, as of the end of each company’s 2007 fiscal year, had annual revenues of more than US$38bn and 210,000 employees, operating in more than 80 countries.

“This is a historic day for HP and EDS and for the clients we serve,” said Mark Hurd, HP chairman and chief executive officer.

“Independently, each company is a respected industry leader. Together, we are a global leader, with the capability to serve our clients — whatever their size, location or sector — with one of the most comprehensive and competitive portfolios in the industry.”

The new EDS division of HP will be led by Ron Rittenmeyer, who was previously chairman and CEO of EDS. The division will be one of the world’s largest outsourcing providers in the fields of healthcare, financial services, manufacturing, retail, communications and media and entertainment.

HP’s Technology Solutions Group (TSG) will shift its outsourcing operations to EDS as well as portions of its consulting and integration activities.

TSG will focus on servers, storage, software and technology services.

“Clients will benefit from the combined scale and strength of our companies as they transform their technology environments,” said Ann Livermore, executive vice-president, TSG, HP.

“This is an important step forward in our ability to help them solve their challenges through practical innovations that deliver valuable business outcomes.”

However, integration of EDS is far from over and tech-industry analyst Ovum yesterday sounded a cautionary note in light of the unsteady global economic picture.

“Even with ongoing global economic pressures, we continue to be upbeat but very cautious about the outcome of this deal,” said John Madden, research director at Ovum.

“As we’ve said from the time this deal was announced in May, HP faces a laundry list of integration issues with EDS: financial, organisational, operational and cultural (and interestingly cultural issues may present some of the highest hurdles).

“HP has already said it intends to merge the two companies’ outsourcing groups, which will clearly make HP an even more dominant force in infrastructure — and increasingly application-related services.

“While an economic slowdown may force customers to delay some IT investments, it can also open up new outsourcing avenues as customers turn to third parties to operate various aspects of their IT more efficiently.

“Lucky for HP, then, that it will soon have one of the world’s largest outsourcing operations under its roof in a few weeks,” Madden said.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years