Hewlett-Packard, Nokia Sign Outsourcing Pact
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SAN FRANCISCO (Reuters) - Hewlett-Packard Co. (NYSE:HWP - news) said on Tuesday it had won a $185 million deal to manage some of Nokia (news - web sites) Corp.'s (NYSE:NOK - news) computing operations, the type of agreement with recurring revenue that HP has targeted as part of a strategic push into information technology services.
Under the pact with Nokia, the world's largest mobile phone maker, HP's services unit will run and manage Nokia's business infrastructure operation centers in Finland, the United States, China and Singapore over three years.
HP Services President Ann Livermore said Nokia was taking a first step toward outsourcing and that HP would manage chiefly competitors' equipment in the deal, which guarantees a 25 percent cost reduction for Nokia.
``It is a mostly non-HP environment,'' she said in a telephone interview. ``The first things we'll mostly do for them is consolidation.''
That means HP will switch out smaller computers and plug in its own, an example of the doubling effect on revenue that services contracts have for hardware companies.
``Traditionally you do end up with more product from your own company as part of the environment, so we would anticipate that,'' Livermore said.
International Business Machines Corp. (NYSE:IBM - news) is seen as the leader in offering information technology services and the company that HP is most eager to take on after acquiring rival Compaq Computer Corp. (NYSE:CPQ - news)
HP Services will manage internal communications systems such as Lotus Notes groupware and file print and sharing services for Nokia's 60,000 global users. HP said it will be responsible for supporting those services and 3,000 servers in seven operation centers worldwide.
Some 260 Nokia employees will become HP employees as a result of the agreement, HP said.
Livermore said Nokia had chiefly used Compaq computers running Windows NT, and that the deal had been nearly done before HP and Compaq announced early this month that they intended to merge.
ECONOMY, ATTACK HELP OUTSOURCING
Livermore said the broader trend toward outsourcing had accelerated with the economic downturn. The hijacking attack that destroyed the World Trade Center and damaged the Pentagon (news - web sites) two weeks ago and the resulting business disruptions could accelerate that trend, she said.
``The economy is actually having a positive impact on the outsourcing business, because it is forcing more companies to look at their core competencies that they want to keep in house, and what can they outsource to someone else to achieve a lower cost.
``That is not true for consulting, because that is viewed as a more discretionary expense. And as well, the recent terrorist attacks have a neutral to somewhat positive impact. People are concerned that they have backup and recovery capabilities.''
MERGER
HP has been fighting a pitched battle to prove the merit of its plan to take over Compaq, although HP's stock price has fallen sharply since the deal was announced.
HP shares were off 0.99 percent to $15.94, in line with the broader market on Tuesday.
Livermore said that investors were coming around to see the competitive advantages of the merger in the services business.
``We are starting to get more and more positive reactions as they understand more of the detail associated with the deal,'' she said. |
