Dude, What about Dell? EDS Deal Puts HP on Collision Course with IBM

This is the classic: I give you cash, you give me ownership tale. Me encanta!

Good Move by HP but lets see what they do with it?

HP has to continue the M&A play to keep the books cooked. Take a look at the decade long pattern of 'over-valued' deals for DEC, Tandem, Compaq, etc.. the huge payouts, and the 'goodwill' values. As long as there is an 'integration' in play the books are in play as well. The guys who took over Compaq and architected this strategy were the smartest guys in the room, having lunch in Houston with thier buds from Enron. I thought they had photos of Carly but they must have groomed Mark in advance.

Yes, the financials have to be kept on the stove at a low simmer, periodically seasoned with organic BS and artificial sweeteners. The Ponzi scheme continues...

Dell is irrelevant in this discussion. It amazes me that the market is so naive to assign a product label to a company and declare that this company is a "PC Maker" or a "Server Company"or a "Printer Company"or a "Services company". Look at HP closely, it is all four of these and more, in fact, it is almost split equally between these four. To compare to Dell to HP is to compare 1/4 of HP's $112B portfolio to about 80% or so of Dell's $32B portfolio. In market share of PC's, HP wins. What do they win? They win in a business where the margins are so paper thin that they are laughable. The PC business is the worst value sector of the Computer industry,yet the financial writers keep harping on it....who cares? SO how does Dell compare to HP in the printer business...who cares?Dell needs to get a printer market, or start selling HP ink.. SO, how does Dell compare to HP in the server business?...who cares? Dell needs to get a server offering that is competetive... SO, how does Dell compare to HP in services? ...whocares? Dell needs to get a services offering SO, why are we comparing Dell to HP again? People think we are in the 1990s when Dell and Compaq duked it out for low margin commidity PC. We are in 2008...the Story is HP vs IBM, if anything. Dell is irrelevant.

Dell will be hurt as EDS was buying only Dell to provide to the gov under the huge EDS gov I&T contracts. The margin on EDS contracts is lower than IBM because the EDS ID&IQ contracts make it so by law.

Dell will be hurt as EDS was buying only Dell to provide to the gov under the huge EDS gov I&T contracts. The margin on EDS contracts is lower than IBM because the EDS ID&IQ contracts make it so by law.

Reminds me of a telephone company which bought a small company owned by their Chairman!!! The purpose of a public company is to enhance shareholder value --- not to squander it's capital in dozens of overprices companies.

Might be the most brilliant move to sell any "new business or hardware re-fresh existing business" through EDS business arrangements and gain further marketshares in all facets of HP's hardware business. As far as the part of competing with IBM in the Services Industry goes will mostly be decided by who can sell and keep more "outsourced business" through shifting work off-shore where it is the least expensive to do it.

STOCK PRICE PUNISHMENT IS OVERDONE !

I agree, the punishment of the HP stock price is overdone, considering that they just grew their services business enormously. Services is the only segment of their business that has a huge double digit growth potential and HP just bought into some tremendous markets in the US and US federal government. EDS was the prime supplier at GM, so now HP is...EDS had a substancial presence in the federal space, now HP does. So their reward for this long term strategy is to get hammered in the short term while they fix the redundancies of the two businesses they just combined. The same thing happaned when they bought Compaq, the HP stock tanked because the anal-ysts were not sure if they could pull it off. They did and it was brilliant, in spite of all the naysayers pitching their BS. Even the Packard scion on the Board of Directors couldn't see the value of making a whole out of two parts. The stock tanked then to less than $10 for their efforts. And now it is 4X -5X that. Deja vu...I guess we'll have to wait a couple years now for the dimwit speculators to realize that the long term value has just increased.

This is probably the wisest move HP can do. This would be like Cisco buying CDW....but it's better than that. HP servers are slightly higher priced because of the great services that they provide on their maintenance contracts. Ask any IT guy and they'll tell you that the only reason why they buy Dell is because their Financial number crunchers in the Finance dept. of their company made them. Dell servers are disposable garbage. HP is a quality product you that pays for itself. If HP buys EDS, it's like a cigarette company buying a major grociery store and only offering their cigarettes over it's competitors. This is a great move for HP. Services is a huge business. There's lots of margin in reselling your own equipment..

This is probably the wisest move HP can do. This would be like Cisco buying CDW....but it's better than that. HP servers are slightly higher priced because of the great services that they provide on their maintenance contracts. Ask any IT guy and they'll tell you that the only reason why they buy Dell is because their Financial number crunchers in the Finance dept. of their company made them. Dell servers are disposable garbage. HP is a quality product you that pays for itself. If HP buys EDS, it's like a cigarette company buying a major grociery store and only offering their cigarettes over it's competitors. This is a great move for HP. Services is a huge business. There's lots of margin in reselling your own equipment..

What a dumb ass article: "PCs are commodities. HP needs to expand its services offering". Been reading that for the last 10 years. What's new?

I'm buying more HPQ at these prices! Enough said.

hp has ibm software in their blade servers via blade server.org and acquisition of neoware, which previously bought ibm's netvista thin client business and was their preferred partner for tc's. there is synergy between ibm and hp here as hp will be able to manage the hardware at the bare metal level with preboot execution managment and neoware and the eds 'slate'. additionally, it reopens the govt and fortune 500 up for new business opportunities with product upgrades with hp technology and allows the new entity to position itself for sm business hosting- the new business targets. heck, ibm might look to eds/hp for some outsourcing themselves.

Existing HP Services groups have been held back by the good ol' boys network that is more worried about keeping their jobs than actually delivering real value to HP. I hope Mark Hurd uses "EDS - an HP Company" as the lever to break apart them good ol' boys. Then we'll unlock some real value. If the good ol' boys win, and take control of EDS, I'll be shorting HP. Keep an eye on which group loses more headcount when the "resignations" start getting announced.

"Good Ol' boys" is a good term to use in the case of selling services. Services and Integration were the weak sister at HP for a long, long, time. You simply can't compete with IBM without a powerful services & integration component to the company, no matter how good or complete your hardware line. Acquiring EDS services not only buys HP entry into some very "locked-up" accounts, but gives HP access to some expertise that just can't be gotten without many years of experience. Mark Hurd is a brilliant businessman, making investments only where they make sense, and disinvesting anywhere the result doesn't ending up being a money-making number one position (straight from the book, "Good to Great"). I think he's got a good chance of making HP *the* number one systems provider on the planet.

What have they done well before after acqusitions? They are trying to be like an IBM where in recent activities and momentum have master the art.

After looking this over, the next M&A will be the combination of Dell and Sun; this makes a lot of sense and creates an equal to IBM and HPQ; anyway, just my two cents, Ha!