HP’s announcement that is buying EDS has been received poorly by the markets. HP’s stock is off 6% while IBM, the company who should be hurt by such a deal, has seen its stock rise. Many of the issues people have raised relate to the poor cultural fit plus the relatively poor margins and growth EDS has been generating in recent years. HP in return is arguing that EDS creates a platform for them to grow large parts of their existing business – an argument the market clearly isn’t buying. To me this deal says more about Mark Hurd than it does about anything else. It is hard to argue that he has done a poor job since taking over the helm at HP. The business is stronger by almost every measure. I think he sees EDS as a business he can work similar magic on. I’m pretty sure he sees opportunities to improve the margins as he has at HP and get growth by selling in to his installed HP base. In other words, having done a pretty good job of turning HP around, he now needs something new to challenge him and his team. EDS could well prove a very smart deal. His board has to hope that while he focuses on EDS, someone else is paying equal attention to HP, because you can be certain that the likes of IBM and Sun will see this as a great chance to go after HP’s customers.
Years ago I sat in while a journalist interviewed Bill Gates. A PC was on the desk with Windows running. In most of the windows there were Microsoft applications but in one there was a TV show. I was spell bound. It was like I was watching TV for the first time. My awe struck state came crashing to earth moments later when Bill said: “We’ve finally been able to turn a $3000 machine into a $200 TV set.” His point was clear. Who really needed to have a window on their computer that could show TV channels when in most homes there was already a device that did it much better at a much lower price.
This of course was before the Internet took off and people decided they liked to spend a good portion of their previously allocated TV time surfing the Internet. Web based TV has been very slow in coming but thanks to YouTube efforts to bridge the gap between web surfer and TV watcher seem to be gaining pace. Enter the latest version of Apple TV which, along with all your iTunes and iPhoto content, has a YouTube option that allows you to search and select your favorite content. In effect this turns YouTube into another channel on your TV. Right now most of the content on YouTube is pretty grainy making it a poor relation in the channel stakes. My guess is that this will change. But it also occurs to me that if Apple can effectively turn YouTube into a TV channel, couldn’t they also become a natural home for a host of other channels? I’m pretty sure someone could come up with an Internet alternative TV network. One that uses the functionality of the web as well as its obvious distribution benefits. How long before there is an Apple TV Guide?