Tuesday, May 13, 2008

HP to acquire EDS for $13.9 billion

That's FOURTEEN BILLION...

HP said the deal, which has been unanimously approved by the HP and EDS boards of directors, will close in the second half of the year. HP expects that the addition of EDS will more than double HP's services revenue of $16.6 billion in fiscal 2007. At the end of 2007, HP and EDS had a collective services revenue of more than $38 billion and 210,000 employees, doing business in more than 80 countries, HP said.

Well, this certainly illustrates the level of HP's commitment to market domination

I found this statement by Peter Cohan, "...I think HP's most profitable business, printers, might be able to make better use of the $12.8 billion in capital. This Imaging and Printing Group earned a 13% estimated net margin. It grew a mere 4% to $7.3 billion in revenue and given that this unit is by far the most profitable in HP's stable of businesses, this would appear to be the best place to invest for future growth.

Now may be a good time to sell HP stock. Mark Hurd came into HP as a nuts-and-bolts operator. This deal suggests that Hurd has run out of growth options and that HP can't grow earnings through more cost cuts. I have no doubt that Hurd could cut costs once EDS has been integrated..."

This follows what Hurd said back in March, ""We are shifting our portfolio to drive growth and are aligning our portfolio to margin rich opportunities for investors," he said. "We continue to look for opportunity [for higher gross margins] in software and in services."

What does this mean for IPG, if anything? I don't know yet, but IKON sure as heck would not cost FOURTEEN BILLION dollars...
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