HP to pay $13 billion for EDS?

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May 13 2008
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Carly Fiorina, the former chairman and chief executive officer of Hewlett-Packard, served at HP from 1999 and 2005. She could easily be the most hated boss during the period; at least within Malaysia territory. HP Malaysia was never the same again with most of its top brains “migrated” to the competitors such as Sun Microsystem and IBM. The quality of engineers suddenly dropped like a rock and customers were complaining like mad. Many had switched from HP-UX to Sun-Solaris platform.

Since Mark Hurd took over from the lady, he instantly recognized and pushed the services as the main revenue driver for the company. In Carly Fiorina and Mark HurdMalaysia HP has taken over the IT services from conglomerate such as Maxis and it’s a matter of time (some speculated this year, 2008) before the DHL-APIS located at Cyberjaya would be outsourced to HP as well. Since HP bought Compaq Computer Corp. for $19 billion in 2002, it appears HP is toying with the idea to acquire Electronic Data Systems Corp. (EDS). And this is EDS based in Cyberjaya with HQ in U.S., not the local EDS located at Damansara Jaya or other companies bearing similar name. There were some really funny stories how the local EDS took advantage of such confusion but I’ll leave that for another day.

Texas-based EDS pioneered the concept of running data centers – information technology and business process outsourcing services. The Wall Street Journal reported that HP is willing to pay $12 billion to $13 billion – a price that translates to $24 to $26 per EDS share. HP has about $10 billion cash in its war-chest and its market value is about $115 billion, strong enough to finance the purchase. However culture clashes between HP and EDS could be the main stumbling block to the operation. HP hoped it could rival IBM with EDS’s acquisition.

HP acquires EDS for $13 billionHP earned $7.3 billion on $104 billion in revenue last year while EDS made $716 million on $22.1 billion in revenue. Combined, EDS and HP’s technology services division had about $39 billion in revenue for the year 2007 as compared to $54 billion in revenue enjoyed by IBM for the same period. It would be interesting to see how EDS and HP continue to offer its outsourcing solution to the markets and it would be doubly fun to watch how HP would manage DHL-APIS and EDS data centers located not many blocks apart in Cyberjaya.

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It’s really getting interesting when Shell just sign a contract with EDS worth billions. The Shell IT office also located near the EDS office and they will commence their operation on 1st of July….

I’m wondering what’s their culture will be

Compaq = Tandem + Digital
HP = HP + Compaq

it’s definitely interesting to watch what could happen next …

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