HP acquisition of EDS to be completed by Sept. 30

The merger time frame narrows in wake of EDS shareholder approval

Hewlett-Packard Co.'s acquisition of Electronic Data Systems Corp. is now expected to close sometime between mid-August and the end of September.

In May, HP announced a plan to acquire EDS for $13.9 billion and said at the time that the deal would close by year's end. With the EDS shareholder approval last week, the companies appear more certain about how much time they will need complete the deal.

The closing is now anticipated to occur before the end of the third quarter, according to the company's Aug. 1 quarterly filing with the U.S. Securities and Exchange Commission. If HP doesn't go forward with the deal, it could be forced to pay a termination fee of $375 million.

The merger cannot occur before Aug. 18 under an earlier agreement with the two firms.

HP's acquisition of the Plano, Texas-based firm roughly doubles the size of its services operation. EDS is heavily focused on providing infrastructure services, including data center operations and help desk services to large clients, including General Motors. HP is very interested in automating data centers to cut costs.

Crawford Del Prete, an analyst at IDC in Framingham, Mass., expects HP "will act fairly quickly" to integrate EDS and have the firms operating as a combined entity after two quarters.

HP is expected to make some cuts during the merger, based on CEO's Mark Hurd's plans for the company. EDS has had "very few" layoffs and those "were not at all related" to the pending merger, said spokesman Robert Brand. He stressed that there is "no big, targeted group" for cuts, a point aimed at addressing recent rumors. The company isn't disclosing layoff numbers.

EDS employs about 139,000 people worldwide, with about 47,000 of its workers located in the U.S.

Del Prete expects cuts in personnel based on Hurd's interest in reducing redundancies and costs. Cutbacks could affect HP employees as well those from EDS.

Copyright © 2008 IDG Communications, Inc.

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