HP in talks to buy EDS
13-05-2008
by The Register

HP's Mark Hurd may be remounting his company's services charge, according to The Wall Street Journal, which says he is close to signing a deal to acquire Electronic Data Systems for between USD12bn to USD13bn.

That would represent as much as a 38 percent premium over EDS's current market capitalisation, at least based on Friday's closing price, and a sign that Hewlett-Packard is serious about getting the acquisition completed.

HP confirmed it is in talks with EDS, but said little else. "There can be no assurances that an agreement will be reached or that a transaction will be consummated," a company statement read. "HP does not intend to comment further until an agreement is reached or discussions are terminated."

With HP well into its golden years, the company continues to look for ways to keep revenue growing. It tried to acquire PriceWaterhouse's consulting division in a bid that famously flamed out in 2000 -- IBM ended up buying the group two years later. Since then, HP has taken only baby steps in that direction after the company ran into trouble digesting Compaq, and Hurd was brought in to rejigger strategy and the company.

In 2006, HP acquired Mercury Interactive for USD4.5 billion, and over the weekend, it emerged that the company is poisted to pay STG1.5 billion to take over datacenters from BT. Last year, HP generated USD16.6 billion in sales from services, about 16 percent of its overall USD104 billion revenue.

The deal would be HP's biggest since buying Compaq for USD20 billion in 2002. It could be announced as soon as Tuesday, according to unnamed people the WSJ said were familiar with the matter. EDS shares were 28 percent following the report.

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