"Two king-pins in the technology industry announced Tuesday a merger agreement valued at $13.9 billion, with Hewlett-Packard Co. (NYSE: HPQ) set to acquire computer consulting firm Electronic Data Systems Corp. (NYSE: EDS) in an effort to compete more
aggressively with rival IBM in the technology services business.
The deal, which is set to close later this year, will more than double HP's revenue derived from I.T. services, which the company says amounted to $16.6 billion in fiscal '07.
The acquistion will produce a new services group under the EDS moniker with an HP tagline. Known as "EDS -- An HP Company," the services group will be based in EDS's current headquarters in Plano, Texas, with Ronald A. Rittenmeyer, the current CEO of EDS, continuing at the helm.
Enough To Beat IBM?
Combining forces with EDS makes HP "a lot more competitive by having a whole lot more services personnel," according to Roger Kay, principal analyst with Endpoint Technologies. "IBM is the gold standard. This gives them a better shot at it."
HP's roots in services go back to its 2002 acquisition of Compaq, which itself bought Digital Equipment Corporation (DEC) back in 1998. "They have a pretty good services group, but they wanted to compete with IBM," Kay said. "This puts them closer to that goal."
One question is how well the companies will integrate, but Kay doesn't expect many problems on that front. HP CEO Mark Hurd is "known as good at integrating," Kay said."
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