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HP-EDS is a done deal — so what’s next?
Hewlett-Packard Co. announced in the wee hours of this morning that it’s official — it is buying Plano, Texas-based Electronic Data Systems Corp. for $13.25 billion. The deal, one of the tech biz’s biggest in recent years, will solidify HP’s status as the world’s biggest tech company and make it No. 2 in IT services behind IBM Corp.
So what’s next? For one thing, HP CEO Mark Hurd told reporters and analysts in conference calls today, EDS will remain in Texas and EDS CEO Ron Rittenmeyer will keep running the company as a subsidiary.
Hurd also said not to expect the company to sell off any EDS divisions — good news for HP and EDS workers in Texas, Georgia and elsewhere — because the two companies have relatively little business overlap. (CEOs always say this after a merger, of course, but this time it may be legitimate).
Big money’s professional pundits were mixed on what the deal might mean to HP and the technology landscape. Some, like the tech analysts at Goldman Sachs, said the deal has many positives, but also wondered why HP was putting so much money in a company that recently has had a tough time finding profits. Others, like the analysts at Deutsche Bank Securities panned the deal, suggesting it will result in “modest dilution, low returns and significant opportunity cost.”
Others are trying to figure out what it means to HP’s competitors — especially Dell Inc., which HP surpassed a while back to become the world’s No. 1 PC maker.
Many Wall Street analysts suggested Tuesday that Dell will suffer, at least in the short term, as HP is able sell more computers and other hardware through its new connection with EDS. Financial pundit Aaron Task may have the made the best point about HP and Dell on Yahoo Finance. The deal, Task says, indicates that HP has moved beyond its fight with Dell over hardware, putting that one behind it and turning to its next battleground and its next foe — namely IT services and IBM.
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