HP Bolsters Services Branch with $420M Buy

Seeking to add clout to its fast-growing services business, Hewlett-Packard (NYSE: HPQ) has announced plans to buy a Germany-based consulting firm for about US$420 million.

The deal calls for HP to take over all three divisions of ThyssenKrupp Group's information technology consulting business: Triaton GmhB, which operates subsidiaries in Singapore, China and Brazil; Triaton France; and Triaton North America, which operates primarily in the United States.

Although HP did not detail terms of the acquisition, media in Europe reported that ThyssenKrupp said the deal is worth about $420 million in cash, a price that includes a long-term contract for HP to supply services back to the parent company.

The selloff comes as part of a massive restructuring and loss-cutting effort at the German firm, which operates primarily in the steel-making and civil engineering arenas. HP previously has worked with the company on projects in Europe.

On the Ground

Analysts said the move seems to signal HP's plans to stake a claim on European and Asia-Pacific turf as the top competitor to IBM (NYSE: IBM) in the enterprise services niche.

HP will pick up some notable customers as a result of the deal, including electronics manufacturer Siemens AG and drug discovery firm Aventis.

HP vice president Francesco Serafini said the move will allow the company to "accelerate our growth strategy in the German market and beyond."

For its part, Big Blue heralded its own European news Monday, saying it has won a $127 million contract to supply mainframe computers to a German financial services firm.

The Service Bug

In its most recent earnings report, presented last week, HP said its services unit saw growth of 6 percent compared with last year, an increase the company argued is strong given the overall weakness in the consulting industry. Its managed services, or IT outsourcing, business grew even faster.

Still, IBM remains the dominant leader in the space. Big Blue said it brought in more than $11 billion in services revenue in its most recent quarter, compared with about $3.2 billion for HP.

"HP has made it clear that services would be a big part of its strategy for the enterprise side of its business," Gartner (NYSE: IT) analyst George Shiffler told the E-Commerce Times. He noted that HP once attempted to buy PricewaterhouseCoopers' IT consultancy, only to see IBM later acquire the company and its 5,000-plus worldwide consultants.

"At the same time, you're starting to see Dell gain more traction among smaller enterprises," Shiffler added. "It's starting to be clearer where the differentiations are going to be and where they're going to go toe to toe."

Short But Busy Month

The acquisition marks the third deal HP has closed or announced this month.

The company previously signed and sealed two minor software acquisitions, buying Washington state-based Consera Software and New Jersey-based Novadigm to add to its portfolio of network automation and integration tools. Terms of those two deals were not disclosed.

IDC analyst Loren Loverde told the E-Commerce Times that HP has laid low on the acquisition front until now to give it ample time to digest Compaq, but the company may be more active now that it has its various business units back to profitability. The PC industry has not seen too many large takeovers since HP paid $19 billion for Compaq, though Gateway made a minor splash by paying $234 million for discount computer maker eMachines last month.

"Given the tug of war over market share, some other acquisitions are not out of the question," Loverde said. "It's a quick way to gain customers and expand your footprint."