A Newer HP?
Opinion: Is HP still chasing after the wrong golden egg?Just when you thought you had the "new HP" figured out, Hewlett-Packard CEO Mark Hurd is reported to be exploring a deal to acquire a large player in the outsourcing industry, Computer Sciences. HP has been chugging along quite well since Hurd took over for ousted CEO Carly Fiorina in April. Hurds strategy of cutting costs; focusing business units; and growing through small, niche acquisitions certainly has pleased investors, as HPs stock is up about 40 percent over the past year. CSC could cost as much as $12 billion, with the help of private equity investors, and mark the start of a major consolidation in the outsourcing services industry, Senior Editor Jeffrey Burt reports in this weeks coverage.
It wasnt too long ago that HP spent $20 billion on Compaq Computer, which itself had spent about $10 billion on Digital Equipment in 1998primarily for DECs stalwart services business. Thats a lot of consolidation for $15 billion in annual revenue, about 17 percent of HPs current total revenue and still well behind leader IBM Global Services $46 billion business. Back in 2001, when the HP-Compaq deal was announced, eWEEK quoted one analyst saying, "They are taking two services organizations that have been the tail on the hardware dog"and, one could argue, still holding back HP from realizing its true potential in the digital imaging business.