MEDIA: Media Watch - Speculating on a proposed dollars 18m HP acquisition

Hewlett-Packard's announcement that it was interested in acquiring PricewaterhouseCoopers' consulting business was viewed as a significant effort at restructuring the world's number-two computer maker. In explaining its interest in the proposed dollars 18 billion transaction, HP released a statement saying, 'Acquisition of the consulting practice would complement HP by further strengthening the link between business process transformation and technology implementation' (Investor's Business Daily, September 12).

Hewlett-Packard's announcement that it was interested in acquiring PricewaterhouseCoopers' consulting business was viewed as a significant effort at restructuring the world's number-two computer maker. In explaining its interest in the proposed dollars 18 billion transaction, HP released a statement saying, 'Acquisition of the consulting practice would complement HP by further strengthening the link between business process transformation and technology implementation' (Investor's Business Daily, September 12).

Hewlett-Packard's announcement that it was interested in acquiring PricewaterhouseCoopers' consulting business was viewed as a significant effort at restructuring the world's number-two computer maker. In explaining its interest in the proposed dollars 18 billion transaction, HP released a statement saying, 'Acquisition of the consulting practice would complement HP by further strengthening the link between business process transformation and technology implementation' (Investor's Business Daily, September 12).

CARMA International reviewed coverage of the buyout talks and found that the media most often discussed the reasons why each company was interested in the proposed transaction. In the coverage analyzed, the media gave slightly more attention to HP's reasons for wanting to move into IT services.

The Wall Street Journal (September 12) wrote, 'HP's strategic rationale for the proposed transaction is clear ... Conventional wisdom in the computer industry holds that computing power will increasingly be sold as service, rather than as products.'

A few articles identified HP's move as part of a trend among computer hardware companies to move into the growth-oriented and highly profitable services business. The New York Times (September 12) quoted an analyst: 'The nature of the business has changed because the consumer is really paying for the solution, not the PC, minicomputer or mainframe. And companies that were box providers, like HP, have realized they were being left behind.'

The media also addressed the deal from the PwC point of view, indicating the company was facing pressure from the SEC to separate its auditing and consulting businesses to avoid conflicts of interest with its clients.

Several articles noted the PwC acquisition would be HP's first major buyout under CEO Carly Fiorina, whom the New York Post (September 12) called 'the most powerful woman in corporate America.' HP's push into the services market was often portrayed as part of Fiorina's strategy to accelerate revenue growth.

A fair amount of coverage mentioned investors' initial dislike of the deal and the resulting HP stock slide. Possible clash of corporate cultures was the most frequently cited concern. Furthermore, there were questions about how well HP could integrate the services business without jeopardizing its core hardware business. Finally, some media reports envisioned PwC consultants being asked to promote sales of HP hardware, which in turn might cause the consultants to leave the firm.

Faced with these red flags, a consulting industry publication editor stated, 'In theory, this kind of deal makes a lot of sense ... But there has been very, very little evidence that this will be a success' (Los Angeles Times, September 12).

Expectations will be running high if HP does indeed buy the PwC consulting business. The San Jose Mercury News (September 12) wrote, 'At stake are trillions of dollars of technology and services by companies that want to get up and running on the Web.' Further developments likely will be scrutinized within the context of HP's restructuring and Fiorina's vision for HP.

Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.





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