EnterpriseDB, known for its products based on the open-source Postgres database, today announced that it has named Ed Boyajian, former Red Hat vice president and general manager of North American sales, as president, and chief executive, and board member.
Current CEO Andy Astor will take on the global business development role and focus on building out new markets.
Congrats to EnterpriseDB for scoring such a high-profile executive and to Ed on his new role.
Hewlett-Packard is often thought of as a conservative Silicon Valley institution, not an industry mover and shaker. Yet for the second time this decade, HP is sticking its neck out with a huge merger. First Compaq, now EDS. Wow!
Lots of industry people will certainly write or blog about corporate synergies and how this deal will affect the overall services industry, but my focus is a bit smaller. I believe this deal really ups the ante for HP in the networking space.
As a solutions provider and government outsourcer, EDS builds a lot of big data centers and enterprise applications that pull a lot of hardware along for the ride. The obvious conclusion is that HP can use its EDS arm to sell more servers but HP's networking group could actually be a bigger winner.
Large public/private sector deals tend to be anchored by Cisco networks. EDS won't change this overnight, but slowly but surely it will introduce HP ProCurve switching equipment into the mix. As ProCurve technology gains enterprise scale and functionality, this transition will become more pronounced; EDS will lead with HP ProCurve as its preferred networking solution. All of a sudden, the ProCurve enterprise vision of flat, intelligent switched networks gets a lot more real. And when chief information officers look at the price difference between Cisco and HP networking equipment, a ProCurve networking solution will surely look a lot more compelling.
This vision may seem a bit far-fetched since Cisco owns 80 percent to 90 percent of the enterprise market depending on whose numbers you believe. The thing is that we are in a period of massive networking changes. Data centers will be anchored by 10Gb Ethernet switches, networks will transition to IPv6, and network intelligence for activities like application acceleration, entitlement management, security, and WAN (wide-area network) optimization is changing the way networks are built and used. CIOs typically are more open-minded regarding big technology shifts, thus opening the door for other networking vendors.
HP along with Juniper and Nortel were already gearing up for this new fight. With EDS in tow, HP is in a much better position today then it was yesterday.
One of the curses, I suppose, of knowing one's high-tech history is that way too many news items cause me to go, "Here we go again!"
The proximate tidbit this time is, of course, the news that Hewlett-Packard is acquiring services giant EDS for $13.9 billion. Various news organizations had previously pegged the deal value between $12 billion and $13 billion. The New York Times described it at a $12.6 billion cash transaction.
When we last saw this play, it was with Carly Fiorina in the role of HP's chief executive, looking to spend a reported $17 billion to $18 billion on PricewaterhouseCoopers Consulting in 2000. A lousy set of quarterly results turned in by HP helped to scotch that deal. It also didn't help that a lot of observers thought that HP was offering way too much for an organization with $6.7 billion in annual revenues (2001) and about 33,000 employees.
IBM seemingly provided evidence of this view when it bought PwCC in 2002 for only about $3.5 billion. (A bit of an unfair comparison, given the economic and other events of 2001, but still.) Carly went on to get her acquisition kicks by gobbling up Compaq instead.
So what, if anything, is different this time around?
The money. I'll leave the detailed financial modeling to the appropriate specialists, but here are some back-of-the-envelope numbers. In 2000, HP was looking to pay more than two times the annual revenues for PwCC, which IBM ended up getting for about 0.6 times revenues instead. In this case, HP spent less money ($13.9 billion) for a larger ($22.1 billion annual revenues) organization. At least by this measure, HP's expenditure is therefore much more in line with what IBM eventually spent for PwCC than it is what HP had initially proposed.
HP management capabilities. Especially after this acquisition, something that's really striking is just how closely HP has maintained the course that Carly laid out. There's a slight difference, of course. If one goes back a few years, the boat may have been on a sensible bearing, but it was springing leaks in just about every compartment.
Carly has argued that post-Compaq financial problems just needed more time to work themselves out. Perhaps--but I'm skeptical. In any case, Mark Hurd has made remarkably few changes to HP's strategic direction since he took over. The benefits of scale promised from the Compaq buy have indeed proven out. EDS represents growth of scale along another axis--services--that puts HP that much more in the mold of IBM. The difference from times past is that Mark has a track record for keeping things ship-shape.
HP has made services acquisitions before, but they've been targeted and specialized. The most recent was of EYP Mission Critical Facilities, a data center design specialist that gives HP some legitimate differentiation in the power and cooling game. EDS is broader and bigger than even PwCC would have been.
On the one hand, this means a lot of personnel and fixed costs of the sort that have been no small issue for IBM--the company HP is attempting to mirror in important ways. On the other hand, if you believe--as I do--that companies (especially in small and midsize businesses) are increasingly going to move their computing off their premises and into data centers run by specialists, then acquiring the sort of large-scale hosted services business that EDS includes among its many operations isn't a bad direction for a system supplier at all.
Updated at 8:30 a.m. PDT with additional analyst comment.
Hewlett-Packard said Tuesday it will acquire computer services firm EDS for $25 per share, or $13.9 billion, in a deal intended to boost HP's services revenue.
On Monday night, HP had confirmed that the two companies were in talks, following news reports earlier in the day.
The deal will create a computer services giant intended to rival IBM in the market for serving business customers.
CEO, HP
HP said the deal, which has been unanimously approved by the HP and EDS boards of directors, will close in the second half of the year. HP expects that the addition of EDS will more than double HP's services revenue of $16.6 billion in fiscal 2007. At the end of 2007, HP and EDS had a collective services revenue of more than $38 billion and 210,000 employees, doing business in more than 80 countries, HP said.
HP said it will establish a new business group, called EDS--an HP company, which will be headquartered at EDS's existing executive offices in Plano, Texas.
EDS will continue to be led by EDS Chairman, President and Chief Executive Officer Ronald A. Rittenmeyer, who will join HP's executive council and report to Mark Hurd, HP's chairman and chief executive officer, the company said. All of HP's existing technology services will remain under its TSG (Technology Services Group) wing reporting to its current director Ann Livermore, with the exception of outsourcing, which will now fall under Rittenmeyer's purview at EDS.
This isn't the first time HP has taken a crack at acquiring a major consulting firm. In 2000, HP was in talks to . The controversial acquisition was the first big move by then-CEO Carly Fiorina. But a significant earnings shortfall in the fall of 2000, along with significant hand-wringing on Wall Street, prompted HP to drop the idea.
Hewlett-Packard included this graphic and the one below in a filing Tuesday with the Securities and Exchange Commission.
(Credit: HP)IBM acquired PwC for $3.5 billion two years later, while HP took a dramatically different strategy and acquired PC maker Compaq. With EDS, HP now trails only IBM in the lucrative services sector.
"We're running the playbook we know how to run very well," Hurd told analysts during the conference call Tuesday morning. "We know how to get significant leverage out of our scale. We spent double-digit thousands of hours on the due diligence and planning. This thing (EDS) is very attractive. We didn't bake in a lot of revenue synergies, but they are there."
The two already share some of the same clients, but overlap is "few and far between," Rittenmeyer said during a call with the media. He also hinted at job cuts on the EDS side. "We are continuing to streamline our workforce, and there are going to be some changes. We've already been doing that this year, and have more planned for this year."
The EDS purchase is inconsistent with previous comments made by Hurd, who has said he planned to grow HP from within, in addition to some smaller acquisitions. HP Chief Technology Officer Shane Robison said in an interview that this doesn't represent a shift in strategy and that HP will continue to invest organically.
(Credit:
HP)
The fact that HP's chief agreed to such a large acquisition means he saw significant potential in improving EDS operationally, said Lindy Hanson, senior analyst with Technology Business Research, said in a research note.
"Hurd has a reputation for focusing on the 'numbers' in excessive detail, and TBR believes that the numbers of a combined HP/EDS have been crunched and show strong upside for operational improvement," she wrote.
The consensus among industry observers is that the deal makes strategic sense for both companies, but particularly for HP.
HP "saw the light," according to Bob Djurdjevic, an analyst with Annex Research. EDS already has an established business handling outsourcing contracts in the government and manufacturing sectors, areas in which HP could use the help, he said. "The additional revenues in HP's services businesses is going to help them face serious challenges from IBM."
But the sheer size of the deal is more than a bit daunting. The deal represents the combination of the largest number of people that the IT services sector has seen, Gartner analyst Ben Pring said, and HP faces serious challenges when it comes to integrating two vastly different companies. The track record of deals like this is "pretty spotty," Pring said, and IBM's purchase of PwC demonstrated that the transition can be tough.
"There was a lot of fallout from that," he said. "People who liked the independence they had within PwC found that they didn't care for being part of a huge conglomerate like IBM. Many people won't care to be part of HP; the two cultures are very, very different."
HP's relatively relaxed, entrepreneurial Silicon Valley culture differs vastly from EDS's constrained, suit-and-tie-wearing corporate environment.
"There's bound to be a lot of tension and conflict" in attempting to mix the two, Pring said.
HP's Robison downplayed that notion and affirmed that he thought the two would be a good fit, saying, "They're both services cultures, and both understand services cultures."
He also brushed aside any concerns that a much larger services organization would be unable to meet the needs of smaller companies and added that a bigger scale operation is actually necessary to reach those small customers.
"Not every deal has to be a mega-deal," Robison said. "This is about reaching more of the market."
HP, which was originally due to report its second-quarter earnings Thursday, announced preliminary results Tuesday. Revenue earned was $28.3 billion, or GAAP diluted earnings per share of 80 cents. That compares with $25.5 billion in the same quarter a year ago, or GAAP diluted earnings per share of 65 cents.
It also slightly raised its outlook for the year, estimating total revenue of $114.2 billion to $114.4 billion, up from previous high estimates of $114 billion.
Shares of HP fell 6 percent in morning trading, while EDS's stock was up 1.5 percent.
CNET News.com's Mike Ricciuti contributed to this report.
Updated at 2:20 p.m. PST.
Hewlett-Packard is in talks to buy Electronic Data Systems, HP confirmed Monday.
The Wall Street Journal initially reported the two have been in talks for HP to buy EDS for $12 billion to $13 billion, citing unnamed sources. An agreement between the world's largest computer maker and the IT services provider could come as early as Tuesday, according to the Journal.
Shares of HP were down 6 percent after the story posted, and HP confirmed that trading of its stock has been halted. EDS shares were up 27 percent on the news.
HP, which is due to report its second quarter earnings on Thursday, issued a press release after the close of the stock market Monday.
"There can be no assurances that an agreement will be reached or that a transaction will be consummated. HP does not intend to comment further until an agreement is reached or discussions are terminated," the statement reads.
EDS also issued a statement Monday afternoon confirming that the two are in "advanced talks," and but refused to elaborate.
EDS' revenue in 2007 was $22.1 billion, up 4 percent from the year before. HP's 2007 revenue was $104 billion.
If the acquisition should go through, HP would have a stronger competitive hand against IBM as they compete for business customers. Thanks to IBM's Global Services arm, Big Blue can offer back-end hardware such as servers along with longterm service contracts. But there's one difference: HP still has its PC business, and has spent the last year as the top seller of PCs in the world. IBM, on the other hand, sold its PC arm to Lenovo four years ago.
"I think HP has been wanting in some sense to be more like IBM for quite a while," said Gordon Haff, analyst with Illuminata. "It's perfectly consistent with what HP has been trying to do to become more of a solutions provider rather than (just) a product or technology provider. Whether this is going to make sense is going to turn very much on what kind of price HP can get."
This also isn't the first time HP has taken a crack at acquiring a major consulting firm. In 2000, HP was in talks to acquire PriceWaterhouse Cooper. The controversial acquisition was the first big move by then-CEO Carly Fiorina. But a significant earnings shortfall in the fall of 2000, along with significant handwringing on Wall Street, prompted HP to drop the idea. IBM acquired PWC for $3.5 billion two years later, while HP took a dramatically different strategy and acquired PC maker Compaq. Eight years later, the EDS acquisition would seem to bring the two companies back to the same point, albeit as much larger companies.
In recent years, HP has also been spending big on corporate infrastructure software companies, including the acquisitions of Mercury Interactive, Opsware, SPI Dynamics, Bristol Technology, and Peregrine. Combining those pieces of corporate software with a large consulting arm would be a head-on attack on IBM Global Services' ability to sell consulting services around packages such as the Tivoli management software.
The initial take from industry observers is that this deal is Carly 2.0.
"It's somewhat amusing because we've seen this play before. I think this is sort of further evidence that HP really does see value at scale basically, at size," said Haff. "One of the things we've seen very clearly over the last couple years that is Carly really had the right idea, she just couldn't execute on it. She wasn't wrong for saying HP needed to be bigger, effectively," said Haff. "If (the merger) does go through we're going to end up with an HP that looks a lot like Carly wanted it to look."
The difference, he added, is that it looked like Fiorina couldn't operate a company that large, whereas current CEO Mark Hurd appears able.
The task of integrating two large companies and their vastly different technology and corporate cultures is an unenviable one. The upside is that HP would have more to offer to companies with large IT infrastructure needs, and EDS would be able to broaden its reach. But is bigger necessarily better?
"Not all customers need a battleship to deliver their IT services," Forrester analyst Paul Roehrig points out. "Some customers are looking for smaller, more flexible, transparent service providers. In a sense, I'm wondering if HP is trading off success in the smaller deal for larger deals."
Plus, he added, in the past, "Hurd has said they've not been going after (large deals). The question is, is this a strategic inconsistency or all part of a master plan?"
CNET News.com's Jim Kerstetter contributed to this story.
It's hardly surprising that China Mobile can figure out about where its subscribers are when the phone is on (or when the battery's in). This sort of technology is standard in developed mobile networks, and it's fueling a wave of business innovation and "locative technology."
So why was it so shocking to an AFP reporter when China Mobile CEO Wang Jianzhou told an audience at the World Economic Forum that "we know who you are, but also where you are"? Will at Imagethief has already made the alarmist journalism argument, so I'll leave that to him. (The AFP headline ran under the unnecessary headline, "China's mobile network: a big brother surveillance tool?")
What struck me was U.S. Rep. Ed Markey's (D-Mass.) surprised reaction. Markey said the news was "bone chilling" and told AFP, "I have my eyebrows arched so high they're hitting the ceiling."
I just doubt this really could have been shocking to Markey, who is perhaps the U.S. Congress' most prominent name on telecommunications policy. Along with liberal members of the FCC board, he's been a friend to the "net neutrality" movement, and he was received warmly last year in Memphis at Free Press' National Conference on Media Reform.
Anecdotally, I would say the assumption among people involved with media and politics in Beijing is that it is trivially easy for the government to tap cell phones and gather location data based on which tower your phone is in touch with. E-mail also is often assumed not to be secure. Markey must know the U.S. government can do this too, especially in light of the illegal wiretaps by the Bush administration. (The secret monitoring of U.S. citizens would actually have been legal if they had bothered to get their warrants rubber-stamped by a secret court, so don't think due process is a defense in the United States.)
If Markey was really shocked, he was ignorant. If he was faking it, he was taking part in China alarmism on an issue that is news to practically no one in China. This is not the place to discuss the merits and demerits of government surveillance, but no one is surprised that it's a fact. I wish U.S. politicians wouldn't be so willing to make such statements about China just to grab the spotlight when journalists are unnecessarily aroused.
Ed Zander
(Credit: Motorola)The imminent departure of Motorola CEO Ed Zander marks the close of an interesting period in Moto's history. Three years ago this month, the company emerged from its post-StarTac hibernation to give the world the now iconic Motorola Razr V3. As any gadget geek can tell you, Moto had a winner with the V3. It spawned several revamps and scores of imitators, and it launched a cell phone design revolution that continues to this day.
Since that time, however, some Moto watchers (us included) have suggested that the company was attempting to ride the Razr wave a bit too long. And while Moto has had a few non-Razr successes under Zander's tenure, it has had its share of bombs as well. We take a look at Zander's cell phone hits and misses in our slide show.
Correction at 8:15 a.m. PST: Due to an editing error, Motorola's standing in the handset industry was misstated. Motorola is the No. 3 handset maker worldwide.
Embattled Motorola CEO Ed Zander will resign from his post at the end of the year, the company announced Friday.
Greg Brown, Motorola's chief operating officer and president, will take over as the company's CEO. Brown was also appointed to the Motorola board in July.
Zander, who has struggled to right the cell phone maker and successfully fought off a proxy fight with billionaire investor Carl Icahn earlier this year, will continue as board chairman until the end of his term next year.
Ed Zander
(Credit: Motorola)Motorola, the world's No. 3 cell phone maker, was on top of the market at the end of 2006 thanks to robust sales of its Razr handset series. But as the Razr became more widely available and its price dropped, the company failed to offer a strong follow-up, began losing ground to competitors, and lost its No. 2 spot to Samsung.
Motorola said Zander also will continue to serve out his employment contract as a strategic adviser to the CEO through January 5, 2009. In that capacity, he will not be an officer at the company. A former president of Sun Microsystems, Zander was brought in as Motorola CEO in early 2004 to replace Christopher Galvin, the grandson of the company's founder.
Update at 7:55 a.m. PST: "We are exceedingly fortunate to have a leader of Greg's caliber, vision and experience," Zander said in a statement. "He has been an invaluable partner and I am confident he is the right person to be the next CEO of Motorola and lead the company through its multiyear transformation. Next year marks my 40th year in the technology industry. This is the right time for me to move on to the next phase in my life and spend more time with my family."
Greg Brown
(Credit: Motorola)Over the past year, Motorola has faced increasing competition and posted declining sales. Meanwhile, archrival and No. 1 handset maker Nokia has posted rising sales.
Motorola has undergone some management changes since the beginning of the year, when its chief financial officer retired and was replaced on an acting basis by Thomas Meredith, a board member from outside Motorola and the former chief financial officer for Dell.
In March, Brown was promoted to president and chief operating officer at Motorola, after having overseen four businesses areas at the company. Brown, who joined Motorola in 2003, handled the company's $3.9 billion acquisition of Symbol Technologies, the second largest transaction in the company's history.
In July, Motorola took the rather uncommon step in the corporate world of naming Brown to its board of directors. The CEO, and sometimes the chief financial officer, of Fortune 500 companies will sit on the company's board. But the No. 2 executive is not often part of the mix.
Ed Zander, listen up. Get your wallet ready and shareholder activist hat on.
Your arch nemesis, shareholder activist Carl Icahn, has sold his Icahn Funds, which he manages, to American Real Estate Partners, according to a Reuters report Thursday.
American Real Estate Partners is publicly traded, and Icahn holds a 90 percent stake in the company. So, with AREP purchasing Icahn's private investment funds, which have been vocal on those holdings it deems as poor performers--like Zander's company, Motorola--CEOs such as Zander may want to invest in AREP.
And what might these CEOs do if AREP's performance begins to tank? They could launch a proxy fight, much like Icahn did with Motorola, or initiate a campaign to withhold votes to re-elect AREP's directors and chairman. Icahn, by the way, has agreed to serve as AREP's chairman for five years and as CEO of the Icahn Management Entities.
While any efforts by CEOs to launch a proxy war with Icahn's AREP would be entertaining, in the end, it would be futile. The guy holds a controlling stake and isn't likely to vote himself off the board.
Especially, since they're renaming AREP as Icahn Enterprises.
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