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HP Swoops on Synstar

Hewlett-Packard Co. (NYSE: HPQ) says it will acquire data center specialist Synstar for $300 million cash in a deal that will strengthen its IT services arm. The offer was made earlier today by Merrill Lynch & Co. Inc. on behalf of HP BV, which is a subsidiary of HP.

Bracknell, U.K.-based Synstar provides a broad range of data center services including maintenance, help desk, and disaster recovery solutions -- key services in which HP lags behind IBM Global Services, Electronic Data Systems Corp. (EDS), and Computer Sciences Corp. (CSC) (NYSE: CSC). Synstar has operations in eight countries across Europe, where its 1,500 existing customers include Lloyds TSB, Daimler Chrysler, the U.K.s Ministry of Defence, and the Dutch Police.

Steve Vaughan, Synstar’s CEO (not the musician) told NDCF this morning that the company’s board has already recommended the offer to shareholders. “We’re getting very positive feedback from the shareholders,” he says. “I would expect this to complete over the next couple of months.”

In recent months Synstar has overhauled its business model to focus on managed services. Rather than selling customers a single service maintenance contract, for example, Synstar is now bundling a broad range of services in an effort to improve its margins.

Most organizations now are keeping longer hold of their servers and mainframes and upgrading less often, which is bad for traditional big iron vendors such as HP. Through services, however, vendors can keep extracting revenues from their customers in-between hardware sales. HP has already been active on this front; earlier this year the company announced a series of outsourcing deals worth $500 million with MCI (Nasdaq: WCOEQ, MCWEQ), Standard Register, and TD Bank Financial Group (see HP Lands Outsourcing Deals).

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