AFI BLOG: Media and Technology

Fortune

Why the EDS deal may prove to be a smart move - and how it fits into HP’s larger plans.

We’re sitting under a canopy of trees on the patio outside Mark Hurd’s office, and the man looks ready to hit someone. Earlier in the week, when word leaked out that Hewlett-Packard planned to buy EDS for $13.9 billion, a chorus of Wall Street analysts started second-guessing the deal - and by extension, Hurd’s judgment as HP’s CEO. EDS has too many expensive employees, went the conventional wisdom. It’s less profitable than HP. Its culture is broken. An acquisition will only drag HP down. That the pundits aren’t cutting him more slack clearly irritates him.

“I already know the math,” Hurd says, trying to keep his voice down. He’s about to host a lunch for HP’s board to meet EDS chief Ron Rittenmeyer, and the group is just out of earshot. He continues in his emphatic whisper: “This work will get done.”

Truth be told, maybe Hurd has earned the benefit of the doubt. After all, he has pulled off a remarkable three-year turnaround that has made HP the biggest tech company on earth - $104 billion in sales last year. Part of doing that was pulling off acquisitions, including HP’s $24 billion purchase of Compaq (which was even bigger than EDS). No, he didn’t come up with that deal - his predecessor, Carly Fiorina, did but he made it work.

Almost since the day he arrived at HP, Hurd and two deputies - Ann Livermore, head of enterprise business, and Shane Robison, the strategy chief - have been discussing ways to radically expand sales to big corporations, and EDS does that nicely. That’s not the whole plan, of course; HP has a huge and growing consumer side too. “When you look at the total opportunity for us, it’s somewhere north of $1.2 trillion. The consumer’s a big piece of that,” Hurd says. In fact, no other tech company offers a broader array of products to both companies and consumers. The issue really is shoring up both sides of that equation.

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