HP goes service shopping

HP goes service shopping

Hewlett-Packard has confirmed it is currently discussing the finer details of an acquisition of PricewaterhouseCoopers' global management and information technology consultancy practice.

HP is attempting to buy the business to broaden its "e-services" solutions portfolio, particularly in the area of professional services.

Terms of the transaction are yet to be agreed upon by both parties, and neither is yet bound by any contractual obligations over purchase. It is understood HP are currently negotiating a cash-and-stock acquisition of around US$18 billion.

Australian IDC services analyst Kathy Beckman sees the move as positive for HP, providing it takes full advantage of PricewaterhouseCooper's intellectual property when absorbing the unit.

"It could be a good move for HP, as long as they see it as more than another way of selling HP products," she said. "I suppose they have seen the success of IBM forming a services company, and are following the example."

"HP have a services arm, but it is a very small proportion of their revenue," Beckman said. "Positioning themselves against the likes of IBM, it will take a lot more than this to come out on top. Nevertheless, it should increase their market share."

Both US and Australian representatives from PricewaterhouseCoopers and Hewlett Packard were unable to comment except to confirm that talks were going ahead.

Being that PricewaterhouseCoopers are Hewlett Packard's accountants, if the transaction goes ahead the accountancy contract will need to be terminated in line with auditor independence requirements.

"Considering the deal can't go through until that happens, this acquisition would probably take a couple of months," Beckman said.

Gartner analyst Rolf Jester sees the top-end of the services industry becoming increasingly consolidated, citing Cap Gemini's purchase of Ernst & Young's IT arm, KPMG's partnership with Cisco, IBM's success with IBM GSA and even Sun Microsystems experimenting in the services market as examples.

"Expect major mergers and acquisitions in the services market, because as the market matures, buyers are going to rely on strong brands," he said. "Small and medium-sized service providers will also be acquired, as the whole IT consulting market becomes more aggressive."

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