HP to Acquire EDS for $13.9 Billion

HP and EDS have signed a definitive agreement under which HP will purchase EDS at a price of $25.00 per share, or an enterprise value of approximately $13.9 billion.

The transaction is expected to close in the second half of calendar year 2008 and to more than double HP’s services revenue, which amounted to $16.6 billion in fiscal 2007. The companies’ collective services businesses, as of the end of each company’s 2007 fiscal year, had annual revenues of more than $38 billion and 210,000 employees, doing business in more than 80 countries.

HP intends to establish a new business group, to be branded EDS - an HP company, which will be headquartered at EDS’s existing executive offices in Plano, Texas.

“The combination of HP and EDS will create a leading force in global IT services,” said Mark Hurd, HP’s chairman and chief executive officer. “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.”

Acquiring EDS advances HP’s stated objective of strengthening its services business. The specific service offerings delivered by the combined companies are: IT outsourcing, including data center services, workplace services, networking services and managed security; business process outsourcing, including health claims, financial processing, CRM and HR outsourcing; applications, including development, modernization and management; consulting and integration; and technology services. The combination will provide extensive experience in offering solutions to customers in the areas of government, healthcare, manufacturing, financial services, energy, transportation, communications, and consumer industries and retail.

This will be HP’s biggest acquisition since it bought Compaq Computer for $19 billion in 2002. Buying EDS will give HP more tools to challenge IBM in the lucrative technology services field. HP already has replaced IBM as the world’s largest technology company, based on revenue.