Hewlett-Packard Co. announced plans Tuesday to buy Electronic Data Systems in a tie-up that creates a global powerhouse in computer services to compete against IBM.
The world's leading computer maker said it would buy Texas-based business services outsourcing titan EDS for 25 dollars a share in cash, in a deal valued at 13.9 billion dollars.
"The combination of HP and EDS will create a leading force in global IT services," said Mark Hurd, HP chairman and chief executive.
"Together, we will be a stronger business partner, delivering customers the broadest, most competitive portfolio of products and services in the industry. This reinforces our commitment to help customers manage and transform their technology to achieve better results."
California-based HP's massive data centers and experience in business computing hardware would mesh well with the expertise EDS has in outsourcing technical services for companies, according to analysts.
"It is a very bold move but I wouldn't say it's a super surprising move given what HP's core strengths are," IDC executive vice president of worldwide research Crawford Del Prete told AFP when news of talks was announced Monday.
"They complement each other very well. There is a lot of synergy that can go on."
Analysts at Briefing.com said: "Adding EDS would expand HP's service offering and also increase its market share in the industry, helping it better compete with industry heavyweight IBM."
EDS says at its website that it founded the information technology outsourcing industry in 1962 and is now a multibillion-dollar company handling services for banks, hospitals, shops, energy producers and other firms.
The price represents a premium of 32.6 percent to Friday's close for EDS shares.
The companies' combined services businesses had annual revenue of more than 38 billion dollars at the end of fiscal 2007. HP said its services revenue totaled 16.6 billion for fiscal 2007, so the acquisition more than doubles its business in this area.
EDS was founded by Ross Perot, who became a billionaire and presidential candidate, by paying an incoporation fee of 1,000 dollars, and buying unused computer time at an insurance company to process data for other firms, according to a company history. It grew into a company with some 20 billion dollars in annual revenues.
HP, in a separate earnings report, announced a preliminary profit amounting to 80 cents per share, below most Wall Street estimates. Revenue rose to 28.3 billion dollars for its fiscal second quarter compared with 25.5 billion one year ago.
The company said it would provide more details in an earnings report next week.
Hewlett-Packard shares fell 5.9 percent to 44.07 dollars on the news. EDS added 1.5 percent to 24.45 after a 27 percent jump on Monday.
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