HP today announced it plans to acquire EDS for close to $14 billion, or $25 per share of EDS stock -- a deal which has some industry watchers speculating if HP has what it takes to handle large-scale acquisitions with finesse and knock IBM out of the top spot in the global IT services market.
The proposed deal not only represents another mega-merger for HP, but also gives the company more ammunition in its war against rival IBM. The two vendors compete in several markets, but Big Blue with its IBM Global Technology Services business dominates the IT services market, bringing in around $54 billion in revenue. HP garnered a more modest $16.6 billion in IT services revenue in 2007, but couple that with EDS' more than $22 billion in revenue and HP emerges as a strong contender to IBM's IT services throne.
As Gartner research vice president Ben Pring puts it, the EDS acquisition represents to HP "in a word, big revenues." But it will also deliver HP to the slot just behind IBM in the global IT services market, a position HP will likely want to advance to number one in the coming months.
HP competes with IBM in several markets and the two vendors seem to be neck-and-neck in the race to become the world's largest technology vendor. For instance, HP in 2006 became the largest computer company in terms of revenue, with sales increasing 6% to $91.7 billion, compared with IBM's year-end total of $91.4 billion. Yet for the first quarter in 2007 IBM came out ahead of HP in x86 server sales, according to Gartner, with about 1.6% more market share than HP. But HP topped the market for blade server sales, and the two vendors tied in second place behind EMC in the computing storage business, according to IDC.
For the record, HP bought Compaq in 2002 for $23 billion, set its sights on Mercury Interactive in 2006 for $4.5 billion and last year laid down $1.6 billion for data center automation vendor Opsware -- and that is just naming a few of HP's notable acquisitions.
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