According to a report in Deal Journal, the model for combining the outsourcing businesses of Hewlett-Packard Co. and Electronic Data Systems Corp. originated in
joint venture discussions between the two sides. The original proposal was for HP to fold its outsourcing business into EDS' and let EDS run the combination. And in fact, that's what they're going to do, except HP will first
buy EDS for $13.9 billion.
One goal is to get EDS' operating margins up to HP standards. Since the combined outsourcing operation will continue to be run by EDS CEO Ron Rittenmeyer, it will be interesting to learn more about how this is expected to work. Perhaps there's a prominent role for some HP outsourcing execs a level or two down from HP EVP Ann Livermore, who had been overseeing outsourcing as part of her duties as technology solutions EVP at HP? Consider what HP CEO Mark Hurd
told analysts:
"We're running the playbook we know how to run very well. We know how to get significant leverage out of our scale. We spent double-digit thousands of hours on the due diligence and planning."
Sounds as if a lot of the cost discipline and synergy
experience is supposed to come from the HP side -- not surprising considering HP's
record with Compaq.
- Kenneth Klee
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