Reports Say, HP's India BPO Operations Likely to be Divested

According to news reports, outsourcing firm Hewlett Packard Co. is thinking about spinning of or shuttering down segments of its outsourcing business in order to concentrate on the high-margin areas in the technology services division.

HP bought Electronic Data Systems in 2008 for $13 billion and now HP managers are considering divesting portions of its outsourcing operations - this is supposed to have a direct impact in the company's business process outsourcing division, Reuters reported.

A source close to the story said, according to calculations HP can obtain more cash for this asset in the current situation versus the cash flow that the segment is projected to generate in the near future. The source added that HP's India operations or the human resources BPO unit would be one of those business that is likely to be divested.

With the service division, the Pal Alto, California-based firm raised a solid $709 million in income for the quarter ending on April 30 - this compares to a year-ago figure of $40 million. Most of the technology outsourcing and BPO business was derived from EDS, which is a pioneer in this area.

Alternatively, if the assets do not fetch a fair price, HP may decline from selling these assets. Some of the firms interested in the assets are said to be Indian tech firms and outsourcers, i.e. Stream Global Services and IncTeleTech Holdings Inc.

Hewlett Packard's business process outsourcing, offering back office support to its customers is viewed by the firm that is a low-margin business that is not an integral part of the company's growth.