Tuesday, August 26, 2008
HP Completes “Carly Fiorina Memorial” EDS Merger
Hewlett-Packard (HPQ) has wrapped up its acquisition of technology services giant Electronic Data Systems Corp. (EDS), the company’s largest purchase since the $20 billion merger former HP CEO Carly Fiorina orchestrated with Compaq Computers six years ago.
Thankfully, it wasn’t nearly so rancorous.
Valued at $13.9 billion when it was first announced, 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.
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,” Gartner’s (IT) Ben Pring said when the deal was announced back in May. “[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.”
And 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,” Illuminata analyst Gordon Haff said in May. “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.”
