IBM, P&G in a BPO deal

NEW YORK: International Business Machines Corp. is in exclusive negotiations to take over some human resources tasks from Procter & Gamble Co., said the companies.

The Cincinnati, consumer products company would transfer about 700 of its employees, who handle the company's compensation, payroll, benefits, administration and employee services, a P&G spokesman said.

IBM, the world's largest computer services company, often takes on employees in such contracts, which can last up to 10 years.

The Armonk, New York company, competed against Accenture Ltd and Convergys Corp. for the deal, P&G spokesman Damon Jones said.

Jones said the talks between IBM and P&G are expected to be complete in the next several weeks, but he declined to discuss either the length or the value of the deal, saying the terms were not finalized yet.

This is the third step in an effort by P&G to cut costs by transferring services to outside companies, including Hewlett-Packard Co., he said.

Soundview Technology analyst, John Jones, said that he estimates the deal to be at the high end of a range of $300 million to $500 million and that it will be over a six- to seven-year period.

He said that he expects the terms are favorable for IBM because such business process outsourcing deals generally tend to be more profitable than managed technology services contracts.

Jones rates the stock an "outperform." Soundview has not done banking for IBM and he does not own any shares.

IBM shares closed at $81.90, off 10 cents, in New York Stock Exchange trade on Thursday.

© Reuters