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Article

Title: H-P's IBM Envy Drives Deal

Author: Gomes, Lee Article Type: Company
Source: Wall Street Journal, v251 n113 pB8(1) Publication Date: May 14, 2008
  ISSN: 0193-2241
URL of Publication: http://www.wsj.com

Hewlett-Packard Co.'s decision to acquire Electronic Data Systems Corp. (EDS) is driven by the envy of the money made by International Business Machines Corp. (IBM) in selling services. HP wants to move away from being a hardware company like Dell. EDS, founded by former IBM salesman Ross Perot, 'is the original computer outsourcer.' Originally government and private companies paid EDS to run their mainframes, and the company's scope has now grown to include helping companies share and implement their technology strategies. The EDS deal is the second time that HP has tried to break into services. It previously proposed purchasing PriceWaterhouseCoopers, though that deal fell through. The company then purchased Compaq and rose to become the number one computer manufacturer in the world. The EDS deal comes with substantial risks, not the least of which are the companies' two very different styles, which will have to be melded into one. The worst risk, however, is that the strategic logic of the deal is faulty in a way that is similar to the faulty logic many say is behind the collapse of the Microsoft Corp. bid for Yahoo! Inc. EBay Inc.'s purchase of Skype, the free Internet telephone service with next to no revenue, for $2.6 billion, is another cautionary tale for HP CEO Mark Hurd. EBay told analysts it would use Skype to allow bidders to talk to sellers, though this turned out to be 'a fairytale.' It is now rumored that EBay is looking for bidders for Skype.

Companies:
Dell Computer Corp eBay Inc
EDS Hewlett-Packard (HP) Co
IBM Corp Microsoft Corp
PricewaterhouseCoopers LLP Skype Technologies SA
Yahoo! Inc

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