HP-EDS buy may signal Western bite back in outsourcing

Hewlett-Packard (HP) will purchase ICT services giant EDS for $13.9 billion ($25.00 per share, approx.), in a deal that will bring the IT solutions vendor into greater competition.

The acquisition is projected to close in the second half of calendar year 2008 and HP expects it will double its services revenue which totalled $16.6bn in fiscal 2007.

EDS delivers a portfolio of ICT and BP outsourcing services to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, consumer and retail industries, as well as and to governmental and public sector agencies.

Specific service offerings from the combined companies will span IT outsourcing (including data centre services), workplace support, networking services, managed security; applications; consulting and integration; and technology services.

̶0;[With the HP/EDS deal] Consolidation seems to have come to fruition in a big way,̶1; says Martyn Hart, chairman of the National Outsourcing Association. ̶0;Outsourcing stories from the last few years have belonged to the Indian players like TCS, Infosys, and Wipro: these are the ones that have experienced exponential growth and been on acquisition sprees throughout Europe to create global capabilities. There has been little movement in the western market - perhaps the HP and EDS story is a sign of the Western market biting back.̶1;

With this acquisition, Hart believes, IBM has a major competitor on its hands: ̶0;Perhaps this will cut into [IBM̵7;s] profit margins, or maybe the removal of one competitor could benefit them.̶1;

Every outsourcing player in the market is assessing the pros and cons of the HP/EDS deal, Hart adds, as are the customers ̵1; ̶0;Especially UK government, which has a significant numbers of contracts with both parties̶1;.

HP will establish a new business group, branded ̵6;EDS - an HP company̵7;, headquartered at EDS's offices in Texas.

Further information:
www.hp.com
www.eds.com
www.noa.co.uk

Image: HP's acquisition of EDS gives the company greater opportunities in the ICT outsourcing services industry

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