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Computer maker Hewlett Packard HP announced Wednesday it has completed the acquisition of Electronic Data Systems Corp. EDS for USD13.9 billion. It said the acquisition, by value, is the largest in the information technology services sector following HPs purchase of Compaq in 2002.EDS is a leading outsourcing services provider, with the ability to provide lifecycle capabilities in health care, government, manufacturing, financial services, energy, transportation, consumer & retail, communications, and media and entertainment.
HewlettPackard said Tuesday that its USD13.9 billion purchase of Electronic Data Systems is complete, but the Palo Alto computer giant wasnt ready to say what the future holds for nearly 140,000 EDS employees.
The massive deal, which HP says will expand its business in the lucrative field of technology consulting and outsourcing services, is the companys biggest acquisition since HP bought Compaq for nearly USD20 billion in 2002.
HP Chief Executive Mark Hurd has promised to cut costs and improve efficiency at EDS, based in Plano, Texas. While industry observers say thats likely to mean some layoffs, HP said it wont discuss any plans in detail until Sept. 15, when the company has scheduled a presentation for Wall Street analysts.
Hurd, who has cut staff and lowered costs in other HP divisions, has a good track record of improving profit margins, analyst Shaw Wu of American Technology Research wrote in a note to investors last week. Wu said hes confident that HP management will wring efficiencies out of the combined companies.
Some analysts have suggested it will be a major task for HP to absorb a company as big as EDS. But Hurd is credited with successfully completing the integration of Compaq although that deal was initiated by his predecessor, Carly Fiorina and for overseeing HPs acquisition of 26 other companies since he became CEO in 2005.
Those earlier acquisitions include smaller companies that made software for automating data centers and other business functions, which HP hopes to use in its consulting and outsourcing business.
Hurd said last week that more than 500 HP and EDS staffers were working full time on efforts to integrate the two companies. He previously announced that EDS chief executive Ron Rittenmeyer would continue to run EDS as a Texasbased division of HP, reporting to Hurd.
Another HP division, the Technology Solutions Group run by Executive Vice President Ann Livermore is transferring most of its consulting and outsourcing functions to EDS. Livermores division will focus on selling servers, storage systems and software to business clients, though it will still provide some consulting services.
The new structure was praised by Mark Mayo, a partner at the Houston consulting firm TPI, which advises businesses on outsourcing and other strategies. While HP has technology and other resources that EDS did not offer, he said, EDS has a proven model for delivering service to clients, so it makes sense to keep EDS executives in charge of the new division.
Rittenmeyer on Tuesday announced his management team for the division, including several EDS executives and one from HP , Andy Mattes, who was a senior vice president for HPs outsourcing services.
HP, which had more than USD104 billion in revenue last year, already employed about 172,000 people before the EDS deal. The two companies combined had more than USD38 billion in revenue from IT services, while industry leader IBM had USD54.1 billion.
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