HP Confirms Talks To Buy Electronic Data Systems

[OhioChick]

Source: Information Week

Acquiring EDS, the world's largest "pure play" outsourcer, would immediately turn HP into a major services firm capable of rivaling IBM.
May 12, 2008 04:35 PM

In a deal that would create a hardware, software, and tech services powerhouse, Hewlett-Packard (NYSE: HPQ) is poised to purchase outsourcing giant Electronic Data Systems (NYSE: EDS).

In a public statement issued Monday after the stock market closed, the company said it "confirmed that it is engaged in advanced discussions with Electronic Data Systems Corporation regarding a possible business combination involving the two companies."

HP added that a deal is not certain: "There can be no assurances that an agreement will be reached or that a transaction will be consummated." The company said it "does not intend to comment further until an agreement is reached or discussions are terminated."
HP provided no further details.

The Wall Street Journal said the deal could be announced as early as Tuesday and also reported that HP might pay between $12 billion and $13 billion to acquire Dallas-based EDS. The newspaper cited unnamed sources familiar with the negotiations.





Read more: http://www.informationweek.com/news/services/outsourcing/showArticle.jhtml?articleID=207602791

[ChromeFoundry]

1. I'm interested to see what this merger will do to IBM n/t

[OhioChick]

3. Big Competition. n/t

[happygoluckytoyou]

2. LAST TIME THIS HAPPENED... IBM BOUGHT PRICE WATERHOUSE FOR 3 BILLION WHEN THE MARKET TANKED

[OhioChick]

4. H-P Aims to Become Big Services Player

May 12, 2008, 4:55 pm

H-P has been trying to boost its services business for years. The expected acquisition of outsourcing giant EDS could do that in a big way.

Businesses are increasingly turning to outside firms to provide information-technology work – anything from software development and management to running a data center. There are two interrelated reasons for this: Most businesses realize that they don’t gain a competitive advantage from, say, monitoring their corporate network, and it’s cheaper to have someone who monitors 100 networks do it than to do it themselves.

Tech companies, of course, see dollar signs. IBM – the industry’s 400 pound gorilla – now derives more than half of its revenue from services. Only $16.6 billion of H-P’s $104 billion in its 2007 fiscal year came from services, however. EDS has revenue around $20 billion a year and has a roster of giant clients including General Motors and Royal Dutch Shell. EDS typically does higher-end (and hence higher-margin) work for these customers like designing the systems that are used for product development and manufacturing, in addition to managing mainframe computers and other tech infrastructure.

One other note: EDS isn’t exactly an avant-garde choice. It’s often held up as the epitome of the old model of outsourcing, where an army of contractors would come to the client. Nowadays, the race is on to perform tech services in countries like India and China where the people cost less. (EDS has been aggressively globalizing, too of course.) Usually this saves customers money; it definitely helps the service providers’ margins. It will be interesting to see how H-P expands EDS’s global operation over the next several years.

http://blogs.wsj.com/biztech/2008/05/12/h-p-aims-to-become-big-services-player/?mod=WSJBlog

[N4457S]

5. I Lived...

...literally down the street from EDS in Plano for a number of years. Going to the grocery store was half the distance to their HQ.

They've been a sick company for quite some time.

[OhioChick]

6. Looks like job cuts will follow:

HP-EDS merger could lead to services job cuts
Increased IT automation may play a role in workforced decisions, EDS CEO says

May 13, 2008 (Computerworld) Hewlett-Packard Co. plans to complete its $13.9 billion acquisition of Electronic Data Systems Corp. during the second half of this year, initally creating a combined company of 309,000 employees. But job cuts may be on the way, as the two companies combine their operations and try to move customers toward increased automation of data centers.

In acquiring EDS via a deal that was announced today, HP is taking over a company with 137,000 employees — nearly two-thirds of them outside the U.S. Many of those workers — at least 23,000 as of last July — are in India, but EDS has staffers in just about every other major country as well.

During a conference call this morning, neither HP CEO Mark Hurd nor Ron Rittenmeyer, the top executive at EDS and soon to be head of a new EDS business unit within HP, offered clear specifics about what will happen to the workforces of the combined companies. But they did play a bit of a good cop/bad cop routine when discussing that issue.

Hurd said that EDS employees "will benefit from the opportunities that are created through this acquisition, including our ability to compete more effectively in existing areas and push into new growth opportunities."

http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9085198&intsrc=hm_ts_head

[OhioChick]

7. HP's EDS Deal To Spark M&A In Indian Services Sector

HP's EDS Deal To Spark M&A In Indian Services Sector

HP's deal to buy EDS is expected to spark a round of consolidation in the Indian technology outsourcing sector, as suddenly much-smaller rivals scramble to stay competitive.

By Reuters
InformationWeek
May 13, 2008 03:52 PM


BANGALORE - Hewlett-Packard (NYSE: HPQ)'s deal to buy Electronic Data Systems (NYSE: EDS) is expected to spark a round of consolidation in the Indian technology outsourcing sector, as suddenly much-smaller rivals scramble to stay competitive.

Analysts say Infosys Technologies, Tata Consultancy Services, Wipro, and Cognizant Technology Solutions may now be forced to look for acquisitions to compete with a combined HP and EDS, and boost flagging profit growth.

"Businesses of companies like Infosys and Wipro are under pressure, as their rivals like International Business Machines (NYSE: IBM) and Accenture have really learnt how to be competitive even in a sluggish economy," said Avinash Vashistha, CEO of outsourcing consultancy Tholons.

"This merger will only make (the) situation worse for them by potentially creating a third competitor," he said. "Now, it has become imperative for them to make acquisitions to fill the gap in their services portfolio and get a global footprint. If they don't go for inorganic growth at this stage, they will clearly be at a competitive disadvantage."

http://www.informationweek.com/news/services/outsourcing/showArticle.jhtml?articleID=207603297