Breaking News – The Earthquake and possible HP-EDS Merge?

Things are not going well this week. Not only the powerful earthquake ravaged thousands of lives in China, but also the breaking news on the EDS website. EDS has comfirmed advanced talks with HP. What the hell is going on here?

The Earthquake

I had 3,4 friends asking me if I felt the building shaking around 3pm yesterday. I was like, emmm, I was working on the 4th floor and I really didn’t feel anything wrong. A couple of minutes later, people started calling me saying workers at Xujiahui and Lujiazui areas had to leave their work and emergency exit their buildings which confirmed that was an earthquake. Following that, thousands and thousands posts appeared on Mop.com. Within the next hour or so, BBC and most of the Chinese leading internet news websites have put the breaking news as their headlines. I’m sure you can find more and more information, news and photos anywhere on the net now.

It was shocking really. I had thought about the numbers – 7.9! Magnitude 7.9!!! Holy shit! Man, you know what? That’s terrible. The worst earthquake in China’s history was the Tangshan earthquake and that was Magnitude 7.8. It happened at mid-night and 240,000 people died in that earthquake. The whole city just went into dusts and ashes! Luckily this time it happened during daytime and it was on the outskirts of Chengdu, but still, officials claimed that more than 10,000 people have died in this tragedy so far this morning.

I still remembered that I MSN’d and called up my friends in Qingdao to check if they were alright when I confirmed there was an earthquake yesterday afternoon. Although, most of them just kept questioning me if I was joking around… I said ‘NO!’… I don’t think they had earthquake in Qingdao and they don’t even read the bloody news for fuck’s sake. Anyway, I made sure my family and Yi was fine. so I calmed down and got back to work.

For updates on the earthquake please visit Sohu.com and another other news sites. CCTV and most other Chinese TV News channels have the earthquake rescure action covered 24-7.

The HP-EDS Talk

Well, I didn’t watch Eco News this morning. However, I got the email from Ron Brooks. It’s a copy from the headline news on EDS official website. Title says it all, “Electronic Data Systems Corporation Confirms Advanced Talks with Hewlett-Packard Company”. What’s that all about?

Hewlett-Packard is in talks to buy technology outsourcing company Electronic Data Systems Corp for $12 billion to $13 billion in a deal which would vault it to a close second to IBM in technology services. The acquisition would be HP’s biggest since its $19 billion acquisition of Compaq in 2002. Shares of EDS rose nearly 28 percent, taking its market value to about $12 billion. HP shares fell nearly 5 percent amid some skepticism that slow-growing EDS, still considered in turnaround mode, would provide more than a one-time boost, and might not be worth a premium of as much as 37 percent.

HP has long considered an acquisition to beef up its tech services business, a sector that offers relatively stable income and high margins even in an economic downturn. The worldwide computer services revenue rose 10.5 percent to $748 billion in 2007, according to data released on Monday by market research firm Gartner Inc. IBM continued to be the leader, with 7.2 percent share. EDS weighed in at No. 2, with 3.0 percent of the market, while HP was No. 5, with 2.2 percent market share. Together HP and EDS would have roughly $39.4 billion in services revenue, compared with IBM’s $54.1 billion last year.

Pros – HP gains a very strong No. 2 position in total services market share and professional services market share behind IBM. EDS has been relatively stagnant over the past few years. HP has been trying to promote themselves as a major services organization over the past few years. Growth could temporarily stall but then the opportunity is for the merged operations to be extremely strong and competitive
Cons – If EDS were to remain independent it would have a tough time holding on to its number 2 slot in IT services market. Besides HP and IBM, EDS also competes with Accenture and Computer Sciences Corp in the United States, as well as Indian companies Infosys Technologies Ltd, Tata Consultancy Services Ltd and Cognizant Technology Solutions Corp.

Quotes from EDS frontpage News, Reuters, The New York Times and Business Week