HP Buys EDS For $14 Billion…. Dell Is Screwed

It appears that HP has picked up EDS $14 billion so that it can enhance it’s IT outsourcing business. This is a great move for HP as it now has the ability to go one on one with IBM for that market. The big loser in this has to be Dell who had been trying to make a move into that market, but with this purchase they might as well throw in the towel now as they have nothing that competes against IBM or “The New HP” as I am calling them. That’s because HP clearly made the decision to buy their way into that market rather than “roll their own” services arm like Dell has. And of course IBM has been in the services arena forever. That leaves Dell with nowhere to go IMHO.

Perhaps Michael Dell should go “old school” and make good computers for low prices and provide excellent customer service? Seeing that Dell has taken a major beating lately on that front, it might be a good strategy.

Oh, if you want some cheap entertainment, take a look at the e-mail sent to EDS employees. My favorite line is this one:

We are – and will remain – EDS.”

Sure. Until the execs cash out and HP “rightsizes” the company. Compaq employees know what that feels like.

6 Responses to “HP Buys EDS For $14 Billion…. Dell Is Screwed”

  1. davidg@dell Says:

    “so that it can enhance it’s IT outsourcing business. This is a great move for HP as it now has the ability to go one on one with IBM for that market. The big loser in this has to be Dell who had been trying to make a move into that market,”

    Just a small, but I think important, clarification from a Dell employee. We don’t compete with traditional outsourcers and don’t desire to enter the traditional IT services market that this type of deal represents.

    We don’t believe large multi-year outsourcing contracts are the way customers will want to manage their infrastructure in the future.

    We have been focusing on managed services related to IT infrastructure which is a different part of the market.

  2. Merging the lousy performing EDS with the weak HP services unit does not bode for better health. The leaders are Infosys, TCS, Cognizant and WiPro. HP needs to innovate and better develop its global delivery model – not try to see if it can “fix” the badly performing EDS. REad more at http://www.ThePhoenixPrinciple.com

  3. Hi There IT Nerd, glad David@Dell was already here. Just wanted you to know we actually think your perspective has merit if you look at the old yardsticks of this business. Today customers look at the IT business in a very different way. Its not about outsourcing and consulting, it is about delivering flexible, highly configurable, affordable services enabled through remote infrastructure management and software as a service. Its where the business is going based on customer demand and where Dell is and will be in a big way. You can read more about our strategy at http://www.dell.com/dellshares

  4. I appreciate your viewpoints. Thanks for posting them. I still think that Dell has an uphill challenge as HP with EDS is going to be hard to compete against. True, EDS has had some challenges recently, but I still think they’re a player in the outsourcing market. If Dell can make itself different from HP/EDS and IBM then maybe they can compete. From what I’ve read on the Dell Shares website, that’s what they’re trying to do. The question is if they can execute. That remains to be seen.

  5. BTW, I’ve never had a VP of a Fortune 500 company post a message on my blog. I’m flattered! 🙂

  6. Thanks for the follow up itnerd and for coming by Dellshares. Hope we will see you often.

    I guess we will see how this all plays out. However, Dell has always been very strong on the execution front. For some additional information about how the market is changing and how this is HP buying into the past, you might find this post of some interest:

    http://seekingalpha.com/article/77227-hp-s-acquisition-of-eds-misses-real-market-opportunity?source=d_email

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