HP Seals the Deal, Buys EDS For $14B

netbuzz writes "Following yesterday's spate of heated rumors, the announcement comes this morning that HP has completed a deal to buy EDS for just under $14 billion. The acquisition has been approved by the boards of both companies, according to HP. EDS CEO Ron Rittenmeyer has issued an e-mail to his employees promising that the company brand will continue and, "We are — and will remain — EDS."

I hope HP is smarter than GM

[maurert]

As an HP employee I hope HP is smarter than GM was. Remember the GM bought EDS in the 80s and EDS milked GM for all it was worth. EDS did great; GM not so. Of course GM thought it was buying a company to outsource its IT to while HP is looking to merge outsourcing operations with EDS.

So long DELL?

[Quetzo]

Looks like HP is moving into IBM/DELL territory ( managed IT services ). I'm not too worried for IBM.

DELL, on the other hand, has a real fight on its hands. So.. umm... Mike.. why don't you forget about your small business services crap and go back to focus on making good machines and providing good customer service.

I don't know if EDS was the best vehicle to use, but its better than trying to setup something new.

The day after.

[demachina]

"We are -- and will remain -- EDS."

Until the day after the merger, the execs cache out, and the infighting between the remaining managers starts. Executives on the bottom end of the merger always do one of two things:

- Cash out
- Try to outmaneuver the execs on the top end of the merger and take over the whole company, with a lot of bitter intrigue in the process

You have to wonder how current EDS customers who are attached to their non HP hardware and software will feel about this when EDS suddenly has a massive bias to drive every nail with an HP hammer.

this seals it: HP is now a Texas Company

[Ralph Spoilsport]

They were the essence of silicon Valley, having invented a work/life system that was the envy of the industry. Then Carly came along and fucked the place up. Merging with compaq was NOT a victory for HP, but was a major move for Compaq. The pay curves and HR policies were downgraded to compaq levels, and now HP is a shell of its former self. I wouldn't be surprised if after buying EDS they move the HQ from Palo Alto to Houston or Dallas.

Very very sad.

RS

Funded entirely with profit from ink sales

[laing]

HP makes about $10B per year in profit from ink alone. They make another $6B or so from everything else so they could easily afford this transaction. It does raise some eyebrows though because EDS has IT support contracts with lots of big companies. If EDS starts exclusively providing/supporting HP products, competitors (think Dell) might have grounds to complain to the DOJ.

Re:Probably the wrong message to send to customers

[SimonGhent]

I don't know about elsewhere, but, EDS have a reputation for unrivaled incompetence in Australia

And in the UK.

For instance:

"It's amazing that anyone could manage to cock it up so successfully."

http://news.zdnet.co.uk/leader/0,1000002982,39175379,00.htm [zdnet.co.uk]

and

"The Ministry of Defence has forced IT services giant EDS to sign a "failure clause" before it will let the company to continue its bid for the £4bn Defence Information Infrastructure contract

http://www.theregister.co.uk/2005/01/05/eds_failure_clause/ [theregister.co.uk]

Re:Heh...

[AchilleTalon]

Someone can define HP's culture? Compaq's culture? Digital's culture? IBM's culture? And so on? It would be interesting to finally know if they are really so much different.

We're boned

[Anonymous Coward]

We here at Xerox outsource our IT to EDS.

I for one welcome our new HP overlords.

Re:Heh...

[Enderandrew]

I don't know that I can define the above cultures very well, but corporations do have cultures, as do brands. When I worked for Harrahs, Inc. we never said gambling even though we owned casinos. We were about responsible entertainment. We also provided a clear formula to the customers for how much "gaming" meant how many reward points.

When we became Horseshoe, we were all about gambling, gambling and gambling. We couldn't say gambler enough. Our comping system because obtuse and complicated, and seemingly random. We actually comped less, but tried to create the image that anyone could be comped for anything. Employees were also treated better even though we basically had the same management staff all the way up to the GM of the casino, but brand and company cultures were different.

Re:Heh...

[Cheeko]

On the flip side for us Digital folks who had been under Compaq, HP was a return to much more what Digital was like than what Compaq was. It was kind of like putting up with 5 years of people saying "the culture won't change" while they tried to change it, to finally going back to a similar culture.

I think more than anything it has to deal with where the companies priorities are.

Compaq's priorities were obviously its PC business, so the Unix/Linux/VMS/etc etc folks felt like they were getting the corporate culture shaft. Then after the HP merger the culture became much more focused on services and enterprise business, so suddenly everyone at traditional Compaq felt their culture was being crushed because the focus was elsewhere.

If HP's focus really is on growing its services, then there is a decent chance that the culture might stay fairly in tact (they want them for how they are). If instead they simply plan on using EDS as a tool for driving other business goals, then there is a fair chance of being pulled into the same corporate culture.

As a final note as a DECPaq HPer. I much preferred HP's culture under Mark Hurd to the culture at Compaq. He's a cost cutter, but he's also made for a very efficient productive well focused company. More than Carly ever did for sure. Even HP's innovations seemed to have started coming back, with some of the recent announcements in nano computing, etc.

Re:"We are -- and will remain -- EDS."

[R2.0]

"Agilent was a spin off of HP. Wrong way, bub."

I'm aware of that - it illustrates HP's tendency to disregard a division's success or brand identity when deciding it's fate. IIRC, the HP calculator and equipment operations were comfortably profitable and highly regarded in the world of test equipment. But Carly decided she just didn't want to be in that business anymore (distracting from the development of newer, smaller, more expensive ink cartridges), so she threw it overboard with some name out of a focus group session.

Now the operation loses sales because when people search for the HP scopes they are looking for they are NLA, and HP loses the cachet of retaining their REAL hardware roots. Tell me the sum of the parts is worth more than the whole on that deal. I'd expect whole parts of EDS to be thrown overboard within a couple of years.

Re:Heh...

[ArhcAngel]

Having worked at or been related to someone who worked for each of the afore mentioned companies here is my take on their "cultures"

HP - Quality engineering with attention to the details (That culture is all but dead now). I think the venerable HP LJ III is a shining example of that culture. I still have clients who refuse to give up their LJ IIIs.

Compaq - Their culture evolved over the years and not for the better. In the early years they were the scrappy David to IBM's Goliath and they could do anything. Free sodas flowed freely to offset the mandatory overtime shifts and it was very exciting. Because Compaq grew so quickly I believe there were management positions filled with less than qualified people which led to a protectionist mentality of much of the middle management. As a result good people got bounced just in case they had their eye on the middle manager's job. This slowly drove a wedge between workers and management which ultimately led to their demise. I worked there in the early years and during the handover to hp. My supervisor (badge number 35) was released shortly before my project was suspended.

Digital - Many subcultures that never really got along. You had the geek set which did not understand business and a business culture that didn't know how to market what the geeks produced and a marketing and sales group who thought that the VAX would take them to retirement. Very smart people with vary narrow vision.

IBM - They have embraced their white shirt, black tie image in their current advertising campaign which is fitting because that was entirely their culture. My uncle retired from the Air Force after 20 and went straight to work on IBM BIG IRON. Up the same time every day, same clothes, hair style, etc. A very bland life by most accounts but it was fulfilling for him.

Dont be me, dude.

[LibertineR]

As of two weeks ago, I was just like you. Probably 9-10 double shots a day, while coding .NET MOSS apps (SharePoint). I fainted in front of the espresso machine, and was taken to the Hospital, where they told me my blood pressure was 225/135. Checked my heart, found I had early stages of congestive heart failure. Now, I wear a Nitroglycerin patch, take 3 different meds a day for blood pressure and heart rhythm control, and my life expectancy has dropped by at least 10 years. I'm not overweight, used to play basketball every weekend with others who cant jump, but I have been knocking back MAJOR caffeine for about 20 years.

You DO NOT want to join me in the hell that is decaf-coffee, my friend. Not saying you should give it up, but consider cutting back. The caffeine forces your heart to work harder, while constricting your blood vessels at the same time. Heart gets tired, swells up, leaving less room for blood inside for each pump. You dont want this. Docs told me to give up bacon too, but I told them I would rather fucking die.

Cut back, my brother.