Does the HP-EDS deal make mPhasis a step child ?
Date: May 14th, 2008
HP is getting into an acquisition mode and buying EDS a company which has continued to struggle to grow and compete with the larger players. EDS sales has grown at less than 1% since 2002 with a gross margin of 15% compared to HP’s growth of 8% and gross margin of 24%. IBM still has the largest market share of the consulting revenues ( around 7.2%) while HP and EDS have seen decline in the market share . A recent stat by Gartner suggested that the consulting market grew in 2007 by 10.5% to $748 billion.
The industry pundits are all figuring out the relevance of the deal and if there are true synergies there for HP and EDS and the stock market has not been too kind on HP and has continued to be negative after the announcement. Given the battle scars HP still has for the earlier acquisition and the loss of a CEO because of supposedly bad acquisition moves, no wonder HP is challenged to make this work. What does this all mean for mPhasis
EDS holds 60.9% in mPhasis and is the largest client for mPhasis. mPhasis before EDS days has continued to make a lot of noise but has not grown and seems to have been caught up with the wrong strategy for growth - trying to do too many things at the same time and continued to falter. EDS acquisition saw a string of high profile departures seemingly leading the company to again figure out what it wants to do when it grows up while rest of their peers were already grown up. I wonder if this is a challenge with mPhasis in particular or mid size firms in general.
This news of acquisition may not be all good for mPhasis. HP has a presence in India and may want to leverage that more effectively rather than mPhasis. mPhasis has certain expertise in voice based and BPO operations but so does HP.
EDS strategy to effectively leverage an offshoring platform via mPhasis seems to have had mixed results but not what EDS might have expected.
I wonder if the mPhasis chapter is almost closed with the HP - EDS acquisition or will it give mPhasis the boost it needs to grow and scale.
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