HP to acquire EDS for $13.9 billion

Tuesday, May 13, 2008

Hewlett-Packard said Tuesday it will acquire computer services firm EDS for $25 per share, or $13.9 billion, in a deal intended to boost HP's services revenue.
On Monday night, HP had confirmed that the two companies were in talks, following news reports earlier in the day.
The deal will create a computer services giant intended to rival IBM in the market for serving business customers.
HP said the deal, which has been unanimously approved by the HP and EDS boards of directors, will close in the second half of the year. HP expects that the addition of EDS will more than double HP's services revenue of $16.6 billion in fiscal 2007. At the end of 2007, HP and EDS had a collective services revenue of more than $38 billion and 210,000 employees, doing business in more than 80 countries, HP said.
HP said it will establish a new business group, called EDS--an HP company, which will be headquartered at EDS's existing executive offices in Plano, Texas.
EDS will continue to be led by EDS Chairman, President and Chief Executive Officer Ronald A. Rittenmeyer, who will join HP's executive council and report to Mark Hurd, HP's chairman and chief executive officer, the company said.
This isn't the first time HP has taken a crack at acquiring a major consulting firm. In 2000, HP was in talks to acquire PriceWaterhouseCoopers. The controversial acquisition was the first big move by then-CEO Carly Fiorina. But a significant earnings shortfall in the fall of 2000, along with significant hand-wringing on Wall Street, prompted HP to drop the idea.
IBM acquired PWC for $3.5 billion two years later, while HP took a dramatically different strategy and acquired PC maker Compaq.
HP, which was orginally due to report its second quarter earnings Thursday, announced the preliminary results Tuesday. Revenue earned was $28.3 billion, compared to $25.5 billion a year ago, or 80 cents per share.
It also slightly raised its outlook for year, estimating total revenue to be $114.2 billion to $114.4, up from previous high estimates of $114 billion.
CNET News.

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