HP invests $17 b. in IT services business

In its largest acquisition to date, Hewlett-Packard announced it has agreed

to pay a whopping $17.5 billion in cash and stock for the consulting business of

PriceWaterhouseCoopers one of America’s largest accounting, auditing and

consulting firms. A final agreement is expected to take several weeks. The

consulting group will enable HP to offer customers a broader range of services,

from hardware and networking to financial services. PriceWaterhouse's consulting

unit based in New York had $7.1 billion in revenue in fiscal 1999. The

management-consulting business had $4.96 billion in sales.

The unit more than doubles HP’s annual revenue from information technology

services, which include consulting and customer support. IT services is one of

the fastest growing markets. IBM's Global Services division generated $32

billion in revenue in 1999, a third of the company's total sales. HP has been

slow to capitalize on the opportunities in the market and is now trying to catch

up through the acquisition.

HP said the company will make sure the 2,000 partners and 30,000

PriceWaterhouse consultants will not leave the firm. The consultants’

expertise and contacts are the unit’s biggest asset. They will work for

Hewlett-Packard if the sale is completed. The purchase is Hewlett-Packard's

first major acquisition since chief executive Carly Fiorina was hired last year.

Fiorina wants to accelerate revenue growth by offering more services to

potential buyers of its computer systems.

In February, PriceWaterhouse announced it was planning to separate its

auditing and consulting divisions after the US Securities and Exchange

Commission pressured the accounting firm to split those businesses to avoid

conflicts of interest.