Tech: HP buys EDS

Hp has apparently purchased EDS. Given my past interactions with EDS, I can see why HP's stock price has plummeted. But, despite what the article says, I can see where HP probably sees both potential revenue and cost synergies behind the purchase.

On the cost side, EDS does a horribly job of managing their data centers (I know from experience). HP has been putting considerable effort into purchasing and developing tools to make data center management more efficient. Its not hard to imagine that they feel they can lower costs considerably. I don't doubt the potential is there, though I suspect it will take many people many years to actually realize those savings - especially given how poorly run EDS currently is. To quote a comment from the dealbook blog:

I used to work for a company that got swallowed by EDS and then spat out. The year or two I spent as part of EDS were incredibly depressing. The internal message boards were humming with unhappy employees from all around the globe. If I were still there I’d be hoping that HP culture takes over EDS culture, but I wouldn’t be shocked if the opposite happens.

On the revenue side, I'm sure HP hopes to use EDS as a channel to push HP servers. Also: now HP can try to push its servers more aggressively to EDS's customers, and HP can try to push EDS's services on HP customers that are currently only purchasing HP hardware.
Also - by HP more fully integrating into the data center space, they can not only provide customers with servers, but they can also help customers plan their capacity - those increasing HP's ability to forecast their own sales.

As a quick update, apparently EDS will be put in charge of HP's outsourcing segment...

Ms. Livermore had overseen all the pieces of Hewlett-Packard’s services business. But the outsourcing segment that E.D.S. specializes in will be managed by Ronald A. Rittenmeyer, the chief executive of E.D.S, who will report directly to Mr. Hurd.

Mr. Hurd said in a conference call with investors that E.D.S. would bring some expertise and infrastructure in an area where Hewlett-Packard wants to grow. “Frankly, E.D.S. is more mature and more sophisticated in many of the processes they bring to market than we are,” Mr. Hurd said.

On the surface, that probably makes sense, but its definitely pretty scary for dissatisfied EDS customers that recently switched to HP.