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OT-HP joins the big leagues

http://www.taipeitimes.com/News/biz/archives/2003/04/13/201926

Hewlett-Packard awarded Ericsson and P&G contracts


BLOOMBERG
Sunday, Apr 13, 2003,Page 11
Hewlett-Packard Co, which acquired Compaq Computer Corp last year to build up its computer-services business, won a US$3 billion contract to run systems at Procter & Gamble Co and an order to manage Ericsson AB's computers.

HP, the world's third-biggest computer-services company, will run data-center, desktop and other systems for P&G, the largest US household goods maker, under the 10-year deal. Electronic Data Systems Corp lost a bid for the work in November, and Procter & Gamble then said it would break the contract into three to five pieces.

The P&G contract is twice as big as any services contract in HPs history. International Business Machines Corp has traditionally dominated big services contracts, last year winning seven of 14 agreements valued at over US$1 billion, according to market researcher Dataquest Inc.

"HP is finally breaking into the big leagues," Dataquest analyst Eric Rocco said. ``It definitely sends a signal to the IBMs and EDSs of the world that HP is a force to reckon with.'' Last year's US$18.9 billion purchase of Compaq moved HP up to third place behind Armonk, New York-based IBM and Plano, Texas-based Electronic Data. HP is seeking more profitable services deals as computer hardware sales slow.

Palo Alto, California-based HP, also the world's largest maker of personal computers, will take over information-technology operations for Ericsson, the biggest maker of wireless networks. The company declined to reveal the value of the Ericsson contract.

"It's a very large-scale agreement," said Ann Livermore, executive vice president of Hewlett-Packard's services division, in an interview. "We've just been awarded two of what we believe will be the largest contracts this year" in the services industry, she said.

The plan called for almost 6,000 Procter & Gamble workers to transfer to Affiliated Computer.

HP was chosen based on the quality of service, the financial proposition, and as "the type of company that would be a good home for our employees," P&G spokesman Damon Jones said.

About 1,850 P&G employees will transfer to HP. Jones said no job cuts are expected at P&G because of this agreement. An undisclosed number of Ericsson workers will transfer to Hewlett-Packard, the Stockholm-based cellphone maker said.

"What the customers realize is there is a very strong alternative to IBM in the marketplace, and that's HP," said Livermore. "When a company makes a choice like this, particularly a 10-year contract, they are placing a bet on who will be their best partner today, five years out and 10 years out."

P&G will get cost savings of about 13 percent by outsourcing operations, Jones said.
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