Mphasis Ltd., an Indian subsidiary of Hewlett-Packard Company (HPQ) will purchase the AIG Systems Solutions Pvt. Ltd unit of American International Group Inc. (AIG). The deal has yet to clear legal formalities and financial details of the transaction were not disclosed.
While the acquisition will enable Mphasis to enter the insurance sector, we doubt that it will have a significant impact on Hewlett-Packard’s credibility. AIG is one of the biggest insurance companies in the world, but lost face during the recent credit crisis and had to be bailed out by the U.S. government.
Historically, acquisitions have always been a key growth strategy for HP. As part of its plan of expanding into growth markets and furthering its leadership in personal computing, the company acquired Neoware, Inc., a provider of thin client computing and virtualization solutions. Hewlett-Packard has also introduced three thin client products, including the company’s first mobile offering, which addresses business needs for a simpler, secure and easily managed computing infrastructure. Following this merger, HP became a major player in desktops, laptops and servers for different markets.
This acquisition is a small affair compared to other moves made by the company. However, it could develop into something important, since it provides HP an opportunity to enter the insurance business. Although the insurance business is facing different regulatory issues and margins are currently under pressure, a revival in the economy coupled with general economic reforms should offer a level playing field in the future.
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