HP to buy EDS for $13.9 billion

HP to buy EDS for $13.9 billion

Boards of the two companies approves the all-cash deal

Wednesday, May 14, 2008

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BANGALORE, INDIA: Hewlett-Packard (HP) will buy US-based technology services provider Electronic Data Systems Corp. (EDC) by paying $13.90 billion, or $25 a share.

The boards of the two companies have approved the all-cash deal acquisition.

EDS owns 61 per cent of Mphasis, which provides IT solutions and BPO.

"It is too early to speculate on the direct impact of such an event on EDS' subsidiaries. The subsidiaries are key components of our strategy and sales and delivery system,'' said a company statement.

According to analysts, the deal will help HP to achieve considerable footing in the outsourcing service business in India.

While EDS employs more than 27,000 employees, HP India has an employee base of more than 29,000.

Analysts put the take over deal as an achievement of Mark Hurd, who took over as chief executive in March 2005.

This acquisition is the second largest after HP made history by acquiring Compaq Computer Corp. for $19 billion, in 2002.

HP Investors are peeved at the deal as they fear that it is taking an unnecessary risk on EDS due to its declining profit margins.

The EDS deal is likely to close during the second half of this year.

To bring more money from the new EDS deal, HP will cut several jobs and other expenses. However, top executives declined to comment as to how many workers will be laid off.

HP has already beat IBM as the world's largest all-purpose technology company in terms of revenue. In terms of market share, EDS is next to IBM with a share of 3 per cent and HP occupies the fifth position with 2.3 per cent.

In India EDS has nine centers, in Bangalore, Chennai, Pune, Mumbai and Delhi.

©CyberMedia News

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