Hewlett-Packard completed on Tuesday its mega-acquisition of computer services giant EDS.
The deal, worth about US$13.9 billion when it was first announced in May, is among the largest in the technology industry. It is also the second largest one for HP since its acquisition of Compaq was completed in 2002.
HP executives have said they are buying EDS to expand HP's business beyond traditional computing and printers. HP has been trying to develop its software and services business over the last few years. EDS adds a service component that will help the company compete head-to-head with IBM.
Annual revenue for HP and EDS, combined, in fiscal 2007 was more than US$38 billion with 210,000 employees between them operating in more than 80 countries.
But bigger does not always mean better. Merging the companies' businesses and cultures will not be easy. And once the combined company manages to get through the integration, some experts say it still has a long, tough road ahead of it as it tries to compete with IBM.
According to a note released Wednesday, Ovum's research director John Madden, said the research firm remains "upbeat but very cautious" about the outcome of the HP-EDS deal. Ovum had previously cautioned that HP would face various integration issues from the EDS merger including financial, operational as well as cultural, which he noted, might present one of the biggest hurdles.
Madden said: "HP is anxious to bring EDS' cost structure into alignment with the greater HP organization--and undoubtedly, job cuts will be coming somewhere. We're curious how this alignment will affect the consulting groups from both organizations, specifically, whether HP will combine them into one larger organization, and how close this organization will reside to the outsourcing group.
"We would suggest that the decisions on consulting will be some of HP's most critical in the long-term. If one of HP's goals is to provide a true customer alternative to the likes of IBM and Accenture, which use consulting as the door-opener to broader outsourcing agreements with clients, then HP will need its 'new' consulting to engage with top line-of-business leaders and to demonstrate its vertical market expertise," he said.
Under the deal, EDS will operate a new business unit, which will be called EDS. It will continue to be led by EDS' current CEO, Ronald Rittenmeyer.
The deal has had the support of HP shareholders from the beginning. It won approval from U.S. antitrust authorities on June 30 and passed muster with European regulators on July 26.
Eileen Yu of ZDNet Asia contributed to this article, which was first published as a blog on CNET News.com.
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