HP Officially Announces EDS Buy for $13.9 Billion

• By Becky Nagel
• 05/13/08

Tuesday morning Hewlett-Packard confirmed that it plans to acquire IT outsourcing services company Electronic Data Services for $13.9 billion, or $25 cash per share.

HP said yesterday that the company was "in talks" with EDS about a possible deal. The Wall Street Journal and the New York Times predicted the purchase would be announced this week for around $13 billion.

According to HP, both companies' boards have approved the sale. Once the deal is finalized--expected "in the second half of calendar year 2008," HP said--EDS will transition into a separate division of HP and be renamed "EDS, an HP company."

The purchase is widely seen by analysts as a move on HP's part to take on the services arm of IBM. By acquiring EDS, HP said that it expects to "more than double" the company's services revenue, which reached $16.6 billion last year.

According to a study released by research firm Gartner on Tuesday, IBM remains the leader in services with a 7.2 percent share of the market with revenues of $54 billion in 2007, up from $48 billion in 2006. EDS ranked second with $22 billion and 3 percent market share.

HP came in fifth with $17 billion and 2.3 percent market share in 2007. According to Gartner, the global IT services market rose 10 percent to $748 billion in 2007.

"The combination of HP and EDS will create a leading force in global IT services," Hurd said in a statement released by HP today. "Together, we will be a stronger business partner, delivering customers the broadest, most competitive portfolio of products and services in the industry. This reinforces our commitment to help customers manage and transform their technology to achieve better results."

"First and foremost, this is a great transaction for our stockholders, providing tremendous value in the form of a significant premium to our stock price," commented EDS' Chairman, President and CEO Ronald A. Rittenmeyer in the same statement. "It's also beneficial to our customers, as the combination of our two global companies and the collective skills of our employees will drive innovation and enhance value for them in a wide range of industries. In addition, our Agility Alliance will be significantly strengthened."

HP said that it plans to keep EDS located in Plano, Texas. EDS' Rittenmeyer will report to Hurd.