HP takes on IBM with EDS deal - CIOL News Reports

HP takes on IBM with EDS deal

The acquisition could reshape the tech landscape

Prasanto K Roy

Wednesday, May 14, 2008

If HP acquires EDS, it would be a major coup for HP, and could reshape the tech landscape.

For one thing, it will allow HP compete more effectively with Dell globally, and especially in the USA.

Dell and EDS (both Texas-based) are strong allies, and bid for big contracts together, one providing computers, the other services. An HP-EDS deal would be a blow for Dell.

For another, it will bring HP into close competition with IBM.

IBM made the transition from products to 'systems and services' several years ago, and even spun off its PC business to Lenovo.

HP however remained a largely product company, with distinct product lines and divisions: PSG (personal systems), IPG (imaging and printing) and TSG (technology solutions group). It is though the last of these, TSG, which sells servers and storage, that HP has tried to ramp up services.

However, success has been limited for HP, with services contributing to a small fraction of total revenue and profit. Much of HP's bottom line comes from consumables - ink and tones cartridges. So a big services boost through an acquisition was always on the cards.

In India, HP has done well in services, much above its global norm. But even so, services brought in 11 per cent of the Rs. 9,663 crore pie in 2006-`07. For IBM India, services were 37 per cent of its Rs. 3,380 crore pie, making the latter more profitable than HP even in India. (All figures are Dataquest estimates.)

So globally, at least two tech majors, Dell and IBM, would be worrying about this deal, and hoping it does not happen. If it does, it would significantly alter the global tech landscape, and it would cause some worry to the Indian services majors such as TCS and Infosys, too, ramping up the competitive pressure.

HP is likely to keep the EDS operation distinct, and continue to call it EDS (but with a "An HP company" qualifier).
And unlike when HP bought Compaq, the synergies are at least very clear between HP and EDS. That does not however mean integration will be easy, especially if synergies are to be leveraged for cost savings.

This is a mammoth merger of two very diverse cultures, more diverse than HP vs Compaq.

(Roy is president & chief editor, ICT Publications, CyberMedia).

©CyberMedia News

Would you like to Comment on this Article?

Name
Email
Comment Here
Code Verification

Read Comments

Shiju said on 5/17/2008 3:29:32 PM:
The deal is a smart one according to me. It kills many birds with one stone. check out shiju-invent.blogspot.com to know more.

to Shiju

Surjeet said on 5/16/2008 3:00:00 PM:
Must read

to Surjeet

ABC said on 5/15/2008 11:15:56 PM:
Agreed. I had a similar analysis at my blog. thoughtdealership.wordpress.com

to ABC

+ Follow us to know more about SMB +

Google India gets forex violation notice

Websites to help you plan the 'perfect V-Day'

Five Chinese held for theft of 1,600 iPhones

Gaga launches her social networking site

Symphony merges with Teleca

Aakash tablet booking crosses 20 lakh

'IT is like a business partner for PTI'

Sleazegate: Technology spares none

Jailbreak software released for iPad 2 iOS 5.0.1

Why this blackout, Wiki?

Subscribe to PCQuest for iPad & Android tablets

Register Free at DQ Top 20 Online portal & get insights on the Indian IT Industry

Enterprise IT News and Analysis in your inbox

Subscribe to the free PCQuest newsletter

Growth of SME Sector in India

India's EXIM Policy 2010 / 11

Interaction with SMB Association Heads

Profiles of leading SMB Associations

RBI Guidelines on lending to SMEs

Sponsored Links

Custom Site

Demo Downloads On :

1-Click News Updates