Monday, May 12, 2008

HP in Talks to Buy EDS for up to $13 Billion

Hewlett-Packard has confirmed it is in talks to acquire IT services company Electronic Data Systems in a deal that would give it more competitive muscle against worldwide services market leader IBM.
The pricetag for EDS could be around US$13 billion, according to a report in the Wall Street Journal published on Monday.
EDS declined to comment at this time.
The deal would strengthen HP's competitive position against IBM, whose Global Technology Services division has long been a strong profit generator for the company.
"I see it as an attempt by HP to really go head to head with IBM in a much more meaningful way, especially in technology services and IT outsourcing, said Dana Stiffler, research director with AMR Research.
Even after the merger, however, the combined companies' global services revenue would fall about $10 billion short of that of IBM, based their figures reported for 2007, she said.
Shares in EDS surged almost 28 percent on the news to close at $24.13 Monday on the New York Stock Exchange. HP's shares, also on the NYSE, declined by 4.7 percent to close at $46.83, although they recovered a fraction in after-hours trading.
The market at stake was worth $748 billion in 2007, up 10.5 percent from 2006, according to figures from Gartner. IBM led the market last year with about $54 billion in revenue, compared to second-place EDS with $22 billion. IBM also grew faster than EDS last year, increasing its revenue by 12.2 percent year-over-year, compared with 3.4 percent for EDS. That was a reversal from 2006, when EDS had bigger growth than IBM.

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