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HP a More Successful Computer Services Firm Since Compaq Acquisition

Posted on: Thursday, 10 February 2005, 12:00 CST

Feb. 10--Although Hewlett-Packard's 2002 acquisition of Compaq Computer might have started the slide that led to HP Chairwoman Carly Fiorina's dismissal Wednesday, it also led to a very successful computer services company that now rivals longtime industry stalwarts like IBM and Dallas-based EDS.

HP Services, an information-technology consultant and outsourcer, ranked No. 4 among information-technology companies last year. That puts it behind only International Business Machines, Electronic Data Systems and Fujitsu, according to a recent Gartner Inc. survey.

"It will be interesting to see what happens to HP Services now," said Lorrie Scardino, Gartner's research director for IT services. According to Gartner's count, HP Services grew 8.3 percent last year to $14.2 billion in revenue, well behind IBM's $46.4 billion and EDS' $20.6 billion but within sight of Fujitsu's $16.9 billion.

HP Services is a relatively new name in information technology, but the operation has a long history dating to the former Digital Equipment Corp. Digital, commonly called DEC, was a premier maker of minicomputers, which are larger than today's desktop computers but smaller than closet-size mainframe computers, and had strong ties to its corporate customers.

Compaq bought DEC in 1998. At the time, computer services accounted for $6 billion of DEC's $13 billion annual sales and about 30,000 of its 54,000 employees, providing the foundation for today's HP Services.

"The prominence HP gained the last five years in computer services is one of the feathers in Carly Fiorina's cap," said Bob Djurdjevic of Annex Research in Phoenix. "Five years ago, everybody talked about HP as a tired old hardware company."

Fiorina's departure has renewed rumors that HP's far-flung empire, which includes its mainstay printer business, digital cameras and big-screen televisions, could be broken up and streamlined. HP Services, part of HP's Technology Solutions group, could become an independent company.

"I personally feel spinning it off is a good idea," Djurdjevic said. He said it would remove customer doubts about whether HP Services' advice on hardware is influenced by its parent company's ties.

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(c) 2005, Fort Worth Star-Telegram, Texas. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

HPQ, IBM, 6680, EDS, FJTSY, FJTSF, 6702, IT,

Source: Fort Worth Star-Telegram (Fort Worth, Texas)

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