But the deal has also faced its share of criticism. While some analysts have prognosticated that the takeover 
is going to slow down HP’s revenue growth as EDS has seen an average growth of merely 2.8% since the year 2001, others alleged that it would have made more sense to buy business process outsourcing services rather than IT infrastructure outsourcing services, which EDS offers. Furthermore, there are even suggestions about the deal being overpriced.
But HP appears to have no qualms in taking the deal forward. The companies’ collective annual revenues from services business by the end of fiscal year 2007 were more than $38 billion as against rival IBM’s $54 billion. Moreover, if the growth rate of IBM and HP-EDS is compared, IBM is growing at 10%, while the HP-EDS duo will be close at 7%, way ahead of other major players like Accenture and Fujitsu. So the HP-EDS combine has just one target to overcome, IBM.
Apart from all this, there is one more fact that makes this deal even more lucrative for HP. Besides enabling cost control, HP would relish the opportunity to sell more of its hardware to EDS’s existing clients. Trimming of operating costs is going to result in cutting a large number of jobs, but then in the long term, the company expects market value, market share, revenue and profits to shoot up.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
is going to slow down HP’s revenue growth as EDS has seen an average growth of merely 2.8% since the year 2001, others alleged that it would have made more sense to buy business process outsourcing services rather than IT infrastructure outsourcing services, which EDS offers. Furthermore, there are even suggestions about the deal being overpriced.But HP appears to have no qualms in taking the deal forward. The companies’ collective annual revenues from services business by the end of fiscal year 2007 were more than $38 billion as against rival IBM’s $54 billion. Moreover, if the growth rate of IBM and HP-EDS is compared, IBM is growing at 10%, while the HP-EDS duo will be close at 7%, way ahead of other major players like Accenture and Fujitsu. So the HP-EDS combine has just one target to overcome, IBM.
Apart from all this, there is one more fact that makes this deal even more lucrative for HP. Besides enabling cost control, HP would relish the opportunity to sell more of its hardware to EDS’s existing clients. Trimming of operating costs is going to result in cutting a large number of jobs, but then in the long term, the company expects market value, market share, revenue and profits to shoot up.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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