HP buys services from ailing Comdisco

In an effort to further expand its services business, Hewlett-Packard signs a deal to acquire a part of faltering technology company Comdisco for $610 million.

Hewlett-Packard has furthered its effort to expand its services business, signing a deal to acquire a part of technology company Comdisco for $610 million.

HP, based in Palo Alto, Calif., said Monday that it plans to acquire Comdisco's availability solutions group, a 1,300-person division that develops strategies for keeping computer systems accessible despite computer crashes, disasters or other disruptions.

Comdisco and 50 U.S. subsidiaries filed for Chapter 11 bankruptcy protection--which provides for orderly sales of assets--but the availability group has growing revenue and is profitable, said Ann Livermore, president of HP Services.

The Comdisco group had revenue of $440 million for the fiscal year ended Sept. 30, 2000. The transaction is expected to close by the end of October. Comdisco is based in Rosemont, Ill., but has global operations

John Jackson, president of Comdisco's availability group, will lead the HP division, which has yet to be named, Livermore said in an interview Monday. In addition, several hundred HP employees will join the division, she said.

In trading Monday, HP's stock dropped $1.58, or 6 percent, to $26.40.

HP--along with rivals Compaq Computer and Sun Microsystems--has been working to improve its services division to catch up with leader IBM. Services cover a wide spectrum of activities, such as providing technical support for balky PCs, offering advice on new purchases, integrating new servers into older computer networks, or running a company's entire computing operation.

In moves to expand its services work, HP has hired 1,000 services personnel in Asia, signed an airline services partnership with PricewaterhouseCoopers, and broadened a deal with PwC rival Accenture. A September attempt to acquire PwC's technology services group for $18 billion fell through in November, though.

HP wants to increase the size of its services business further, Livermore said. It will do so by striving for new customers, acquiring other companies or their services groups, and signing outsourcing deals in which HP takes over a client's computing infrastructure and personnel.

Livermore said Comdisco had expertise in supporting mainframe computers and data storage, areas in which HP was weaker. HP's emphasis for high availability was more on PCs and on Windows and Unix servers, she said.

Meanwhile, Sun has expanded a partnership with consulting company EDS. Under a new agreement, the two companies will customize hardware, software and services for large corporations in a deal expected to spur $3 billion in revenue in the next five years.

Sun will provide hardware and software, and EDS will provide services, the companies said Monday. The deal includes joint marketing, promotion, financial goals and development activities.