Mark Hurd should be a household name. After amazing turnaround work at NCR, he came to Hewlett-Packard’s rescue in early 2005, to right Carly Fiorina’s sinking ship. Hurd has taken HP (or “Hewlett,” as those dim bulbs at The New York Times call the company) past IBM and the $100 billion-annual-sales mark. HP’s stock price has outpaced the S&P 500 by a multiple of five.
Hurd fixed what was broke. But then…
On May 13th, a week before quarterly earnings were to signal all was still well, HP announced its acquisition of Electronic Data Systems. EDS is a $22 billion company, focused on IT services - long-term, multi-million dollar deals to manage data, transactions, gear, etc. Think outsourcing.
Please, someone, call the whole thing off.
Business Momentum - Bad
EDS’s growth has been anemic and its share price treading water. After all this “globalization,” strangely its business is still mainly U.S. and Europe. EDS does one thing very well. Most everything else goes sour - remember AT Kearney?
Brand Synergy - None
“EDS - an HP company.” Sexy, eh? If you remember that EDS was founded by Ross Perot in 1962, you know all you need to about the EDS brand essence.
Meeting the IBM Challenge - Good Luck
HP wants to be like IBM, which long ago recognized what IT services could mean to overall growth and profitability. If you’ll forgive the PricewaterhouseCoopers thing, IBM has grown a stellar spectrum of service offerings. Buying EDS will get HP one seat at a very big table.
Customer Value Proposition - None
HP built up $16 billion of IT services revenue of its own, under long-timer Ann Livermore. Bringing EDS in does what for the customer? Like most outsourcers, EDS claims “vendor neutrality,” which means you pick the gear. Will HP force new EDS customers to choose HP servers? Doubt it. 1 + 1 = 2 here, not 3.
Channel Proposition - Danger
Whatever service revenue HP wasn’t getting for itself was being obtained by its channel partners. How happy do you think they are now, with EDS in the picture as a potential threat to their livelihood?
This is a bolt-on acquisition. A strategic alliance in another form. Tack on the revenues. Cut some heads.
And no marketing angles to play. No good ones, at least.