HP and EDS: Blockbuster or Bust?

Is HP’s acquisition of EDS a major milestone for the company, or a strategic misstep? There was no shortage of opinions around the web yesterday. Here are some highlights:

• InformationWeek notes that there will almost certainly be significant data center consolidation. In 2006, HP announced one of the most ambitious projects yet, consolidating 85 data centers worldwide into six larger centers located in Atlanta, Houston and Austin.
• Nick Carr says “cloud computing promises to turn many traditional systems-outsourcing businesses into pure commodity businesses - undifferentiated utility services.”
• Drue Reeves at The Burton Group reflects on the competitive implications for Dell. “From a services perspective, the move by HP leaves Dell with few options to get into the services race. About the only possible acquisitions left are Unisys (already a Dell services partner), Accenture, Computer Science Corp, and Perot Systems. Accenture is probably the cream of the crop, but their price – thanks to HP’s move – may be more than Dell wants to pay at this point.”

It’s Official: HP Will Buy EDS for $13.9 Billion

That didn’t take long. HP announced this morning that it will acquire EDS for $13.9 billion, or $25 a share. The deal comes just hours after the companies acknowledged they were in talks, and has been unanimously approved by the HP and EDS boards of directors. The transaction should close in the second half of this year, HP said.

Buying EDS will more than double HP’s services revenue, which amounted to $16.6 billion in fiscal 2007. The companies’ collective services businesses, as of the end of each company’s 2007 fiscal year, had annual revenues of more than $38 billion and 210,000 employees, doing business in more than 80 countries.

HP in Talks to Buy EDS for $12 Billion

Hewlett-Packard is close to a blockbuster deal to acquire Electronic Data Systems Corp. (EDS) for between $12 billion and $13 billion, the Wall Street Journal reported this afternoon, citing “people familiar with the situation.” HP soon confirmed that it was “engaged in advanced discussions with Electronic Data Systems Corporation regarding a possible business combination involving the two companies.”

Shares of EDS surged $5.27, or almost 28 percent, before a halt closed trading at $24.13. The valuation cited by The Journal implies a price between $24 and $26 a share for EDS. HP stock fell $2.48 (5 percent) to close at $46.65.

If HP succeeds, it will acquire more than 100 data centers in 26 countries worldwide, which EDS uses to manage IT operations for some of the world’s largest tier-one enterprises. EDS is the second largest outsourcer in the world.

Report: HP to Buy BT Data Centers for $2.9B

BT is in talks to sell its British data centers to Hewlett-Packard (HP) for 1.5 billion pounds (about $2.9 billion), according to a report in the Sunday Times in the UK. An excerpt:

The deal, which is still being worked on but should be signed in the next few weeks, will lead to BT transferring 400 staff to HP. In exchange for the data centres, BT will take on the management of HP’s voice and data networks globally. It already runs them in Europe. This means the pair will be bidding together for contracts on a more regular basis, though insiders played down the idea that HP and BT were moving towards an eventual merger.

The deal would involve 24 BT data centres in the UK but not BT’s facilities in the U.S. The companies will sign a 10-year contract for BT to continue using the facilities. The Times Online has additional details on the talks, and some background on BT’s operations and why they are contemplating the deal.
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HP Upline Storage Service Still Down

HP is working to resolve technical problems that forced it to suspend its new online storage service, HP Upline, just 10 days after its launch. HP spokesperson Sheila Watson told Network World that the company is investigating an “isolated technical issue” and the service could return this week. HP Upline launched April 7, but began experiencing outages last week. On Friday users received this notice from HP:

On Thursday, April 17th, HP suspended operation of the HP Upline Service. We fully anticipate that suspension of the Upline Service will be temporary and short in duration, and will notify you when the Upline Service is operational again. … If you are not a resident of the United States, we regretfully must inform you that the initial launch of the HP Upline Service was intended for United States residents only. Unfortunately, our filtering tools did not adequately screen for subscribers residing outside of the United States.

U.S. residents will be able to resume using the service once it reopens, while non-U.S. accounts are being deleted. The Upline service launched to generally positive reviews from tech media, including PC Magazine and ArsTechnica.

HP Launches Cloud Platform, Data Center Tools

HP today announced Data Center Transformation portfolio, a suite of services to help companies modernize and consolidate their existing data centers, or shift their operations to a cloud-based service hosted by HP.

The most intriguing new piece of HP’s strategy is the company’s entrance into cloud computing with HP Adaptive Infrastructure as a Service (AIaaS), which lets customers host applications in HP data centers optimized for Microsoft Exchange, SAP applications and other critical business apps. The HP platform joins a growing number of software as a service (SaaS) offerings, most notably Amazon’s utility hosting services and Salesforce.com.

“Within a matter of hours, customers can rapidly access additional computing power to meet their fluctuating needs,” HP said in its announcement. “With HP AIaaS, customers can realize improved service levels and convert traditional capital investment into an ongoing operating expense because all assets are owned and managed by HP.”

Barclays Adopts HP’s Dynamic Smart Cooling

Barclays said today that it will adopt HP’s Dynamic Smart Cooling to reduce energy consumption in a major new data center in Gloucester, England. The big UK bank will become the first company in Europe to use Dynamic Smart Cooling, a comprehensive cooling solution that incorporates airflow analysis, instrumentation and a management server to monitor and manage cooling in a data center.

The announcement builds on an existing relationship in which Barclays has worked with technologies from HP (HP) to reduce data center energy consumption by as much as 40 percent in some facilities. Barclays says Dynamic Smart Cooling is part of a package of energy savings measures that will trim energy usage in its 28,000 square foot Gloucester data center by 13 percent.

Dynamic Smart Cooling (DSC) is designed to provide precise management of air-conditioning systems in response to changes in server temperatures. Real-time monitoring allows data center managers to use a higher set point for cooling systems, which in turn saves energy through reduced use of chillers and computer room air conditioner (CRAC) units. Data center managers can save 4 percent in energy costs for every degree of upward change in the set point.

HP Consolidation Update: 28 Sites Retired

InformationWeek has an update on the data center consolidation by HP (HP), in which the company is consolidating 85 data centers worldwide into six larger centers located in three U.S. cities. CIO Randy Mott shares a status report:

The six data centers - two in Austin, two in Houston, and two in Atlanta - are operational. So far, 28 of the old data centers have been shut off and 700 applications moved into the new ones. … The number of applications now stands at 3,300, and active IT projects are actually down to less than 500. Mott says he’ll get close to the 8,000 mark for IT workers, but just as important is that the ratio of HP IT employees to contract workers will shift from approximately 50-50 in 2005 to about 90-10.

HP’s plan called for it to build two 200,000 square foot data centers in each of three markets. In Atlanta, the facilites are located in Suwanee and Alpharetta.