HP to pitch EDS benefits to financial analysts

SAN FRANCISCO—Looking to challenge IBM Corp.'s hallmark services division in a bigger way, Hewlett-Packard Co. is scheduled to outline its vision Monday for integrating its new $13.9 billion prize, Electronic Data Systems Corp.

HP, already the world's largest PC maker and a major supplier of printers and their highly profitable ink, is pushing deep into IBM's territory with the EDS acquisition, which was completed in August. HP's headcount will swell from 176,000 to 316,000 with the addition of EDS' 140,000-employee work force.

The Palo Alto, Calif.-based company has convened a meeting of financial analysts in the San Francisco Bay area to outline HP's plans for wringing more profits out of the combined companies.

Sanford C. Bernstein & Co. analysts Rod Bourgeois and Toni Sacconaghi Jr. said in a research note to clients that HP stands to benefit from slashing duplicative costs and jobs at EDS, which sells technology services consulting and outsourcing.

But they added that HP faces multiple risks from the acquisition, including potential clashes over pricing with rivals like Armonk, N.Y.-based IBM and Santa Clara, Calif.-based Sun Microsystems Inc. Those companies currently sell technology to EDS, but could squeeze HP on pricing by charging HP more than the standalone EDS received.

Part of the strategy of the acquisition is that HP will try to persuade EDS customers to switch out servers and other technology made by companies like IBM and Sun in favor of HP's offerings. But as Bourgeois and Sacconaghi point out, HP doesn't have comparable offerings in some areas and will be forced to support competitors' products.

HP's conference is scheduled to start at 2 p.m. PDT.

The company's stock price closed down 22 cents Friday at $46.97.