HP's SA acquisition talks fail

Johannesburg, 06 Sept 2007

HP SA is looking at "several" ways to establish its services capability in the country.

This follows the breakdown of talks with a potential acquisition target concerning a deal the vendor hoped to conclude this year.

Last year, HP senior VP and MD of Europe, Middle East and Africa Francesco Serafini revealed the company was looking for a local acquisition to fast-track its services strategy in SA.

"Geography by geography, we know what types of businesses we are looking for. In SA, we are closely monitoring the market and expect to see progress in the next two to three years. SA has delivered very strong growth for us and any acquisitions will build on that performance," he said.

A few months later, Serafini divulged the company was "close to concluding a deal" but would only be ready to speak about the details sometime in 2007.

Unidentified target

Now HP has revealed that the deal is off and the company is looking at a variety of ways to enter the market.

HP VP and MD of the Middle East, Mediterranean and Africa region Ken Willett explains: "For a lot of reasons, we decided not to pursue that particular deal. We had hoped we could clear all the details in the first half of the year, but the deal just wasn't working for us."

The company has declined to disclose the identity of the organisation it was in talks to buy.

New strategy

Willett says HP is still looking at the market for a potential services acquisition. In the meantime, it is examining other ways to build its place in the market.

"For us, the challenge is how do we become a major player in the market? We are still looking at acquisitions, but have added an element of organic entry to our strategy as well. Our organic strategy is based on getting into large outsourcing deals and building capability around that," he explains.

In February, HP and BT announced they had secured seven-year contracts with Anglo American, to manage the company's global voice services, data centre operations and end-user workplace environment. The value of this outsourcing contract is approximately $450 million.

"The bulk of the contract with Anglo American will be serviced in SA. For us, this is a major step forward as it establishes our local services presence and provides a proof point when bidding for other contracts," says Willet.

Competition watch

HP competitor IBM ramped up its local services capabilities several years ago. The exact cost of this strategy is unknown.

However, communications minister Ivy Matsepe-Casaburri revealed in June that she had been led to believe the set-up of IBM's Integrated Delivery Centre (IDC) had required investment exceeding R300 million.

A considerable amount of the delivery portion of IBM's services capability is supplied through the IDC. However, the company's executives are quick to point out that the centre does not make up its full services capability.