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HP, Microsoft In $250 Million Cloud Computing Pact

The vendors promise unprecedented levels of collaboration to drive IT's hottest new architecture.
On the conference call, Hurd dismissed suggestions that the agreement is no more than a simple bundling arrangement between a hardware vendor and a software vendor, which is routine in the tech industry.

"This is the deepest level of collaboration and integration work we've done that I'm aware of," said Hurd. "This is breakthrough stuff," he added.

To prove his point, Hurd noted the companies will dedicate 11,000 service reps to the alliance. Those foot soldiers will be responsible for pretesting, preloading, and servicing products sold under the partnership, which will also have its own dedicated sales force.

"It's the biggest alignment of infrastructure we've ever put behind any kind of enterprise offer we've ever had," said Hurd.

But Hurd said the deal doesn't mean an end to either vendor's existing partnerships. For instance, he insisted HP's technology alliance with Oracle, under which the two companies collaborate on hardware and software integration, remains in effect—despite Oracle's agreement to buyout HP rival Sun for $7.4 billion.

"I think Oracle will continue to be a very important partner of ours," said Hurd. HP reps also stated that Microsoft's Hyper-V will not become the default virtualization engine for all HP servers.

Likewise, Ballmer claimed Microsoft's other industry relationships aren't threatened by the deal. "We respect that HP is going to work with guys that we compete with, and we're going to work with guys that HP competes with," he said.

But while both companies pledged to continue working with third parties, the deal hastens the IT industry's consolidation into a handful of camps that are increasingly looking to offer end-to-end products and services.

Oracle's agreement to acquire Sun is aimed at just that, while IBM in recent years has snapped up dozens of developers of information management software with an eye to building a gapless portfolio of enterprise software and systems.

The promise is tighter integration and less compatibility headaches—but fewer vendors could ultimately mean higher prices. That's led Washington and the EU to maintain a close eye on IT mergers and partnerships, though antitrust concerns did not enter the discussion around Wednesday's news.

Still, HP and Microsoft, though not likely headed toward a full-on merger, now seem intent on presenting a unified front to the market that's meant to counter their rivals' expanding footprints.

Investors, however, appeared to want proof that, despite Hurd's protestations, the deal really isn't just an overblown bundling arrangement. HP shares were off .14%, to $51.90, in midday trading, while Microsoft shares jumped a meager .83%, to $30.33.