Update: HP to buy EDS for $13.9B
The move could make HP more competitive against IBM
IDG News Service - Hewlett-Packard Co. said this morning that it has signed a deal to acquire IT outsourcer Electronic Data Systems Corp. for $13.9 billion, or $25 per share.
The deal has been approved by both companies' boards of directors and is expected to close in the second half of this year. HP said that acquiring EDS will more than double its services revenue to an annual total of $38 billion.
HP plans to fold its outsourcing business into a new unit to be called "EDS -- an HP company," which will be based in Plano, Texas, where EDS has its headquarters.
"This is about us putting our outsourcing business into EDS," said HP Chairman and CEO Mark Hurd, in a conference call with analysts.
The EDS division will be led by EDS Chairman, President and CEO Ronald A. Rittenmeyer, who will report directly to Hurd.
That will take away control of some of HP's services operations from Ann Livermore, executive vice president of HP's Technology Solutions Group (TSG). Services, including outsourcing, contribute almost half of that group's revenue: the other half comes from storage, servers and software. Livermore "has got a big job," said Hurd, adding that much of HP's services activity will remain with TSG.
Rittenmeyer's appointment raised at least one analyst's eyebrows.
"It's interesting that he has been put into this spot, as there were questions about how he was doing since taking over as CEO at EDS," said Gartner Inc. analyst Ben Pring.
The deal will greatly expand HP's IT services business and catapult it to the No. 2 spot, close behind IBM, whose Global Technology Services division has long been a strong profit generator for the company.
"I see [the acquisition] as an attempt by HP to really go head to head with IBM in a much more meaningful way, especially in technology services and IT outsourcing," AMR Research Inc. analyst Dana Stifler said yesterday while the two companies were still in talks.
The worldwide market for IT services was worth $748 billion in 2007, an increase of 10.5% from the year before, according to recent figures from Gartner Inc. IBM led the market with about $54 billion in revenue, followed by EDS with $22 billion. HP was in fifth place with revenue of $17 billion, behind Accenture Ltd. and Fujitsu Ltd.
Buying a services business in a faltering economy is a good investment, because that's when customers are keenest to cut their costs by outsourcing, Hurd said.
- Fast and Furious: How SAS VA Helps IT Deliver BI Platform Read this whitepaper to learn more about the benefits of self-service BI to make business critical decisions.
- API Playbook: Drive API Adoption Through Developer Engagement Learn the best practices of how to engage developers, whether your goal is to attract external developers to your public APIs or improve...
- Leverage the Power of APIs to Turbocharge Your Mobile Strategy: 7 Steps to a Successful API Program In this guide, Intel® Services-which offers industry-leading API management solutions for over 150 top enterprises, including Best Buy, Netflix, Expedia, ESPN, and The...
- IDG Research Survey: Are you Paying Too Much for Your NMS? Feel like you're paying too much for network monitoring? You're not alone. This survey brief summarizes findings from research recently fielded by IDG...
- Live Webcast Master the Changing SAP Landscape with Performance Management SAP landscapes are not getting simpler. Gradually, business processes that used to be contained on a single SAP system now involve a range...
- API Management: The Key to Improving the Consumer Travel Experience Join PhoCusWright's Senior Technology Analyst, Norm Rose, as he shares his insights on how travel suppliers and intermediaries can improve industry data flow...
- Tips to Simplify Database Administration and Development Make your job easier while getting the most from the leading productivity tool for database professionals. Learn tips from Dell Software's Oracle® ACE,... All Applications White Papers | Webcasts