HP's Acquisition of 3Com

News that HP has acquired 3Com is news and probably went unnoticed largely. Juxtaposing it with the acquisition of EDS last year, clearly HP has a strategy where these pieces fall into place. While HP cemented its services game plan to meet the challenge from IBM with the EDS acquisition, with the acquisition of 3Com, it is meeting the challenge from Cisco.

Will be interesting to see how the integration of these companies will play out to bring value to HP's revenue and profitability.

Emerging New Players in Outsourcing Space

In the last two weeks two major acquisitions were announced in the Outsourcing services space --- Dell acquired Perot systems for $3.9b and Xerox then acquired ACS for $6.4b. These come within a year or so of HP's acquisition of EDS for $13.9b in May 2008.

While each company has its reasons to buy the acquired companies, these deals have few things in common:

• The acquiring companies are primarily hardware manufacturers and the companies acquired were services companies. Xerox or Dell did not have any services business contributing any significant amount to the revenue pie
• Both these recent deals came during the time of recession (or at least the fag end of it if we believe that is the beginning of the end of the recession). In these times if Dell and Xerox spent time, energy and money to acquire these companies, it must surely be a major event in their history. This is surely not one of those Cisco acquiring yet another technology company ( by the way they acquired Tandberg yesterday for $2.96b) where the fitment is obvious. The acquisitions by Dell and Xerox are much more aspirational than others as they aim to start a whole new service line of revenue for their companies. In fact Xerox's acquisition of ACS is even more aspirational than Dell's where the latter at least was in a related business.

Talking of aspirational acquisitions, Oracle's acquisition of Sun for $7.4b which was sure stunner for most industry pundits.

And not so back in the past, IBM had sold its hardware business (ThinkPad) to Lenovo, exiting from a product manufacturing revenue stream -- which helped it focus on services business and improve profitability in a significant way.

These deals are surely going to have some bearing in the future outsourcing services market. Dell is keen to shake off its PC-business image, whereas Xerox realizes that somewhere the printing and copying industry would head to be a sunset industry as over time people have been printing less, copying less on the whole. This will help each company jumpstart into the services space and meet the kind of companies they aspire to compete with.

Interestingly both Perot and ACS have a fair offshore presence in India. With the acquisition, both Dell and Xerox would also get access to these facilities and delivery models. It would be challenging to integrate these acquired companies and find the right kind of management team which can oversee a different business from their traditional manufacturing business.