The pending deal should not adversely impact HP partners who are authorized to sell services for its products, Hurd insisted.
"It’s good for HP, so it’s going to be good for our channel partners," Hurd said. "If you look at our outsourcing business today, we try to make it very complementary to our partners."
EDS will remain hardware-agnostic following the acquisition despite the presence of HP’s hardware business, Hurd said.
"While this is a popular question because of our product portfolio, in the services industry you have to work with all kinds of [products]," he said.
The acquisition will enable EDS to begin offering lower-priced services to customers, Hurd said.
"There’s a tremendous leverage you get from scale," he said. "We’re spreading our cost structure across a much larger revenue base. We expect to bring that capability to EDS. With many of the functions they do today, we can help them take advantage of that scale."
Buying EDS will grow HP's services business and allow it to offer a wider range of services to attract large business customers. EDS is strong in infrastructure management services and also custom application services, where it helps companies to design, integrate and manage applications.
EDS is less strong in providing services for packaged applications, however, and the acquisition will not give HP a big lift in the type of business consulting services delivered to line managers and business executives either, Stiffler said Monday.
HP has been keen to expand its services business for years, and EDS is not its first attempt to do so. In 2000 HP dropped plans to acquire PricewaterhouseCoopers Consulting, which was ultimately scooped up by IBM two years later, for $3.5 billion.
HP's services business generated only 16 percent of its total 2007 revenue of $104.3 billion, while IBM makes more than half of its annual revenue from services. The company increased its revenue estimate for fiscal year 2008 on Tuesday morning, saying it now expects revenue of between $114.2 billion and $114.4 billion, up from a previous estimate of $113.5 billion to $114 billion.
The company also reported preliminary results for its second fiscal quarter, ended April 30. It made revenue of $28.3 billion for the quarter, compared with $25.5 billion a year earlier. The figure beat estimates of analysts polled by Thomson Financial, who had expected $27.98 billion. HP also said estimated earnings per share for the quarter were $0.80, up from $0.65 one year earlier. Excluding acquisition related costs, EPS was $0.87, beating the analyst estimate of $0.84.
It expects to announce final results on May 20.
Buying EDS will give HP the muscle it needs to become a serious threat to IBM's services business, said Kathryn Hale, research vice president at Gartner, also speaking before the companies confirmed the deal. HP has the resources and the wherewithal to acquire EDS and improve its business results, she added.
EDS reported revenue of $22.1 billion for its fiscal year 2007, which was up only a fraction from 2006. Net income was $716 million, up from $470 million.