The Compaq Merger Template? Carly Took It With Her…
Hewlett-Packard’s (HPQ) acquisition of technology services giant Electronic Data Systems Corp. (EDS) will be the company’s largest acquisition since the $20 billion merger former HP CEO Carly Fiorina orchestrated with Compaq Computers six years ago.
Hopefully, it won’t be nearly as rancorous.
Valued at $13.9 billion, or $25 per share, the deal will more than double the size of HP’s consulting and outsourcing business. It will likely do the same to the $16.6 billion in revenue from services the company made in 2007 as well.
When the dust has settled around the merger, HP will be the second-largest provider of consulting and outsourcing services, behind IBM (IBM). But it will take some doing to get there. “It’s a very significant combination,” said Ben Pring, a research vice president in the IT Practices Group at Gartner (IT). “[But] people who are skeptical of big integrations will have a field day around this. It’s putting together two large businesses with two different heritages. It’s going to be a big culture clash.”
But if HP manages to pull it off? Well, as Fiorina would likely tell you, bigger is better if you can do it right.
“It’s somewhat amusing because we’ve seen this play before. I think this is sort of further evidence that HP really does see value at scale basically, at size,” said Illuminata analyst Gordon Haff. “One of the things we’ve seen very clearly over the last couple years is that Carly really had the right idea, she just couldn’t execute on it. She wasn’t wrong for saying HP needed to be bigger, effectively,” said Haff. “If (the merger) does go through we’re going to end up with an HP that looks a lot like Carly wanted it to look.”
Comments
HP Sauce is an existing product. HP stands for Houses of Parliament, not Hewlett Packard…
Posted by Alan Rochester at May 13th, 2008 at 12:41 pm