VARs Ponder Potential HP-CSC Deal

That was the question solution providers were pondering last week after a report that HP was eyeing a possible buyout of the $14 billion services giant in conjunction with private equity firm Blackstone Group. Both HP and CSC declined to comment on the possible buyout.

Some solution providers said they are wary of HP&'s apparent growing services ambition.

Charles Browning, vice president of professional services at NetDirect Systems, an HP enterprise solution provider in Loveland, Ohio, said he worries about more competition from HP should it consummate a CSC buyout. “I have no idea what HP&'s rationale is,” he said, noting that Palo Alto, Calif.-based HP has recently laid off people in its services group as part of an overall workforce reduction of more than 15,000 employees. “While HP partners well, those people [HP services] don&'t partner well.”

Browning said one scenario he fears is that HP might use a CSC acquisition to move into smaller outsourcing or consulting deals that could put it in direct competition with solution providers. “Maybe HP is going to have CSC manage the [consulting and integration] and managed services and move them down from the enterprise,” he said. “HP only does deals of $50 million or $100 million and above. If they move it way down the food chain, that will impact partners.”

Mike Cox, president and CEO of Logicalis, HP&'s largest U.S. enterprise solution provider, viewed the potential CSC deal differently. “HP is trying to get into the consulting services business for real; they&'ve kind of been spinning their wheels there. This shouldn&'t be a bad thing for partners,” he said. “We had trouble partnering with HP&'s Consulting and Integration Group. While we were able to partner with the support group and the managed services business like crazy, the [consulting and integration] guys, for some reason, we could never get partnered with.”

By contrast, Cox said it&'s been easier for Logicalis, Bloomfield Hills, Mich., to partner with integrators such as CSC, EDS and IBM Global Services. “Maybe it will get easier with HP [if the CSC deal happens],” he said.

The potential HP deal comes after widespread reports last year that CSC, El Segundo, Calif., was being looked at as a potential acquisition target by private equity firms.

If a deal goes through, HP would likely initially own a minority stake but could buy out Blackstone or other investors at a later date, according to published reports.

The move would be a significant gamble for new HP CEO Mark Hurd, who has focused on streamlining and increasing the profitability of HP&'s existing businesses rather than making marquee acquisitions.