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Mark Hurd move: HP $13.9 billion buyout of EDS- Insightful

By Amarendra Bhushan for CEOWORLD Magazine Updated:August 27, 2008

Excellent work Insightful Mark Hurd! Makes HP look proactive. EDS acquisition also provides HP with a gazillion EDS consultants/BPO Services too (If you remember EDS bought Mphasis a while ago) & EDS has some good clients like BlueCross/GM which outsource a large chunk of IT services to EDS. It is a very smart and future oriented move by HP which will yield huge benefits in a slow release manner to the combined behemoth.

I think given the mega size and mega real estate and Data Centres EDS owns,the deal appears a good bargain for HP. HP may now become a first among equals with IBM. I predict that some counter move from IBM can be expected sooner than later. As you all know HP has completed its $13.9 billion buyout of EDS, closing its biggest acquisition since Compaq in 2002. The acquisition adds 137,000 new employees to the company’s roster and instantly doubles its annual services revenue to $38 billion, as HP moves beyond its traditional computing and printing business.

The merger plan will see HP shift its Technology Solutions Group to EDS oversight, which will remain under the control of current CEO Ron Rittenmeyer. The companies have also announced that they will retain much of EDS’s current management team, though layoffs in other areas are expected as the companies look for greater synergies.

The move allows HP to compete for customers with market leader IBM, which turned over revenues of $54 billion last year.

Mark Hurd

HP Chairman of the Board, Chief Executive Officer and President

Mark Hurd joined HP in early 2005 as chief executive officer and president and was named chairman of the board of directors in September 2006.

With the goal of establishing HP as the world’s leading technology company, Hurd has sharpened HP’s strategic focus and concentrated its investments on three long-term growth opportunities: next-generation enterprise data center architecture and services; technologies for always connected, always personal mobile experiences; and a broad transition from analog to digital imaging and printing across the consumer, commercial and industrial markets.

At the same time, Hurd has improved HP’s operating efficiency and execution as well as its financial performance and customer focus. The result has been increasing growth and profitability, greater value for shareholders and customers, and a stronger competitive position in global IT markets. Between the company’s 2004 and 2007 fiscal years, HP grew revenue from $80 billion to $104 billion and more than doubled its earnings per share. For the most recent four fiscal quarters, HP revenue totaled $113.1 billion.

Prior to joining HP, Hurd spent 25 years at NCR Corp., where he held a variety of management, operations, and sales and marketing roles. He was named chief operating officer in 2002 and chief executive officer in 2003. Under his leadership, NCR reignited growth in its core businesses and improved from a net loss of $2.25 per share in 2002 to net income of $3.03 in 2004.

Hurd is additionally a member of the News Corp. board of directors.

He earned a bachelor’s degree in business administration in 1979 from Baylor University.

Ronald A. Rittenmeyer

President and Chief Executive Officer
EDS

Ronald A. Rittenmeyer is president and chief executive officer of EDS, an HP company, a leading global provider of information technology services, business process outsourcing and applications services with annual revenue of nearly $40 billion.

Before HP’s acquisition of EDS in August 2008, Rittenmeyer was EDS’ chairman, president and chief executive officer. In this role, he was responsible for all aspects of the company’s strategy, operations and execution.

Previously, Rittenmeyer was president and chief executive officer of EDS and a member of the company’s board of directors. From December 2006 to September 2007, he served as president and chief operating officer of EDS. Under his leadership, EDS accelerated its transformation, instilling accountability, increased productivity and quality at every level of its operations. Rittenmeyer also enabled $1 billion in cost savings while improving the company’s market share and win rates.

Formerly, Rittenmeyer was co-chief operating officer and executive vice president of Global Service Delivery. In his role as executive vice president, he managed all of EDS’ delivery capabilities as a single operation, leveraging the company’s world-class delivery infrastructure that spans six continents.

Rittenmeyer brings more than 30 years of business experience to the corporation as a proven leader focused on operational excellence across multiple industries. Before joining EDS, Rittenmeyer served as managing director of The Cypress Group, a private equity firm based in New York, where he was responsible for all operating aspects of the company’s $3.5 billion investment portfolio. Previously, Rittenmeyer served as chairman, chief executive officer and president of Safety-Kleen, Inc., a $1.5 billion hazardous and industrial waste management company. At Safety-Kleen, he successfully led the company’s reorganization from Chapter 11 bankruptcy protection. He retired from Safety-Kleen in 2004.

Before joining Safety-Kleen, Rittenmeyer was CEO and president of AmeriServe, where he led the successful restructuring and sale of the $10 billion food services company. Before that, he served as chairman, CEO and president of RailTex, Inc., a leading short line railroad holding company acquired by RailAmerica in 2000, and also as president and COO of Ryder TRS, Inc., a truck rental company.

In 1994, Rittenmeyer was appointed COO of Burlington Northern Railroad, leading the organization’s marketing and operating units. During his tenure, the company achieved substantial revenue, margin and efficiency improvements resulting in record earnings and performance.

During his career, Rittenmeyer has held key executive positions with industry-leading companies including vice president of operations at Frito-Lay, Inc.; vice president Middle East and Worldwide Operations at PepsiCo Food International; and president and COO of Merisel. He has been a board member of AmeriServe, RailTex, Ryder TRS, Groceryworks.com, Sterling Chemicals, Merisel and Safety-Kleen. He also served as chairman of the board for ExcellerateHRO, EDS’ human resources outsourcing venture with Towers Perrin, and was a former member of the board of directors for the U.S. Chamber of Commerce and the American Heart Association.

Rittenmeyer is currently on the board of directors of the North Texas Kidney Association and the U.S. Army War College Board of Visitors, and he serves on the Executive Board of Southern Methodist University’s Cox School of Business. Additionally, he is a member of the Business Council, the Business Roundtable and the Governor’s Business Council.

Ron Rittenmeyer received his bachelor of science degree in commerce and economics from Wilkes University in Wilkes-Barre, Pennsylvania, and a master of business administration degree from Rockhurst University in Kansas City, Missouri.

Rittenmeyer announced his leadership team for the new business group, representing a mixture of existing EDS direct reports, as well as new appointments from within EDS and HP. His direct reports are:

* Michael Coomer, 55, senior vice president, Asia Pacific & Japan, who held a similar role at EDS.
* Joe Eazor, 46, senior vice president, Transformation. He was previously responsible at EDS for corporate strategy and business development.
* Bobby Grisham, 54, senior vice president, Global Sales, who held a similar role at EDS.
* Jeff Kelly, 52, senior vice president, Americas, who held a similar role at EDS.
* Mike Koehler, 41, senior vice president, Infrastructure Technology Outsourcing (ITO) & Business Process Outsourcing (BPO), who held a similar role at EDS.
* Andy Mattes, 47, senior vice president, Applications Services. He was previously senior vice president, HP Outsourcing Services.
* Maureen McCaffrey, 45, vice president, Worldwide Marketing, who held a similar role at EDS.
* Dennis Stolkey, 60, senior vice president, U.S. Public Sector, who held a similar role at EDS.
* Bill Thomas, 48, senior vice president, Europe, Middle East & Africa, who held a similar role at EDS.

In addition, functional support will be provided by the following individuals, who will report into global functions at HP, consistent with the company’s organizational model. They are:

* Craig Flower, 46, senior vice president of IT, reporting to Randy Mott, executive vice president and chief information officer at HP. Flower was previously HP’s senior vice president for eBusiness, customer and sales operations.
* Tom Haubenstricker, 46, vice president, Finance, reporting to Cathie Lesjak, executive vice president and chief financial officer at HP. Haubenstricker was previously vice president and chief financial officer for EDS’ EMEA region.
* Deborah Kerr, 36, vice president and chief technology officer, reporting to Shane Robison, executive vice president and chief strategy and technology officer at HP. Kerr was previously HP’s vice president and chief technology officer for services.
* Mike Paolucci, 48, vice president, Human Resources, reporting to Marcela Perez de Alonso, executive vice president of Human Resources at HP. Paolucci was previously EDS’ vice president of Global Compensation and Benefits/HR Business Development.
* Sylvia Steinheiser, 43, Vice President and Deputy General Counsel, Legal, reporting to Mike Holston, executive vice president, general counsel and secretary at HP. Steinheiser was previously HP’s vice president, Legal, for the Americas.

But do you really think HP was after some datacenter space. In 2006 they announced its intention to reduce from 85 datacenters to 6. Unless they sold all the datacenters and are now regretting, HP was after some business to strengthen the holes in their offering.

Wild?? maybe! but HP used to have BT provide only its European data networks.. with this acquisition, it will also provide Worldwide data networks.

In the long run Om is absolutely right and this acquisition reinforces a potential offering from HP for Cloud computing. In the short term, most business from EDS is outsourcing infrastructure and it will not change that quickly.

@ $13.9 billion I wonder what the opportunity cost is…

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