Friday, May 23

Hewlett Packard-EDS merger at global level

The HP-EDS deal, at the global level, was a keenly followed one by the Indian investors, the interest stemming from EDS’ 60.9 per cent holding in MphasiS, which raised hopes of an open offer to the latter’s public shareholders.
The MphasiS stock, which ran up 17 per cent between May 12-13 to Rs 242, has corrected to Rs 234.2 on Thursday, after fresh news came in. EDS in a letter to MphasiS, has denied the possibility of an open-offer, because the HP-EDS deal was pursuant to a proposed merger in the US, which does not necessitate an open offer in India.

After EDS took over MphasiS in 2006, the company has been able to gain from new clientele in the Government and manufacturing segment over and above its own BFSI clientele.
MphasiS has also been able to significantly gain from higher exposure to application services, in addition to its traditional BPO-oriented business. It has also given a foothold into the infrastructure management services space, an area anticipated to witness increased outsourcing. This apart, there has been healthy addition of million-dollar clients.
But, despite these aspects, the company operates at a net profit margin of 10.5 per cent, lower than most mid-tier IT companies. An association with HP would definitely help enhance many of the positives of EDS, MphasiS’ parent.
Some of the benefits could come in the form of enhanced geographical footprint, especially in the emerging markets and Asian region, increased presence in the higher-billed IMS space and diversification in terms of verticals of operation. But HP has not, as of now, articulated any specific strategy for MphasiS.

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