Hewlett-Packard buys European data centers from BT Group

Hewlett-Packard Corp. (NYSE: HPQ) will purchase about 24 data centers in Europe from BT Group (formerly British Telecom) for $2.9 billion, the Sunday Times in London reported Sunday, with an official announcement likely to come within weeks. However, BT Group will likely sign a 10-year contract to continue using the data centers with HP; BT Group just won't own them any longer.

But this isn't just a deal for HP to own more data centers as it beefs up its service provider portfolio in addition to its manufacturing prowess. BT Group is also going to manage the remainder of HP's voice and data networks worldwide. The London-based telecom company already handles HP's European voice and data networks, so this transaction is like trading a global service contract for a bunch of server farms. Or at least that's what is sounds like.

HP will continue to ramp up its portfolio of service offerings to better compete with IBM Corp. (NYSE: IBM), a company that left the hardware business to focus on service contracts with corporate customers and that has done well at it under former CEO Lou Gerstner and current CEO Sam Palmisano. HP is already a larger company by revenues than IBM, but it doesn't have the service provider clout yet -- it's still first and foremost a manufacturing company.