Where have we seen this before?
I could swear I've heard this story before -- profitable hardware engineering company sells off its hardware business to some cut-rate manufacturer to focus on the wildly profitable world of "services." I think the other company that tried this is now a consulting company that sells mainframes in its spare time.
I see some big problems with this:
(1) If HP thinks EDS is a world-class consulting & services firm, they need to take a hard look at it again.
(2) Where are those of us who run businesses that really aren't "cloud-hostable" going to turn for hardware? HP is (was?) the only vendor that produces/produced a line of non-garbage PCs and servers. I shudder to think Dell is now the go-to provider in this space.
(3) HPUX and OpenVMS customers pour truckloads of money into HP every year, and support an entire ecosystem of applications. It would be pretty foolish to tell them to instantly port everything to commodity Linux or Windows servers -er- cloudmachines, and expect them not to say anything.
I'm telling you - this cloud stuff is just running its course. Eventually companies will figure out that it's just VMs and SANs in someone else's datacenter, and draw some sane boundaries about what they're willing to host and what will stay in-house. And when they do, they're going to need to keep buying hardware from somewhere to host the in-house stuff. If HP doesn't retain a toehold in the real world while trying to sell the cloud, things could get ugly.