HP to Buy EDS in $13B Deal

HP is closing in on a deal to purchase consulting giant EDS for $13.9 billion.

A report in The Wall Street Journal yesterday revealed that HP is close to clinching the deal, prompting EDS to issue a statement on its company Website: In response to market rumors, Electronic Data Systems Corporation announced that it is in advanced discussions regarding a possible business combination transaction with Hewlett-Packard Company.”

This morning, HP announced a definitive agreement to buy EDS at $25 per share, or a total of $13.9 billion. The boards of both companies have approved the transaction, which is expected to close in the second half of this year.

The deal will be HP’s biggest acquisition since its $20 billion purchase of Compaq six years ago. It could also help boost the vendor’s storage business, which has been identified as a top priority by CEO Mark Hurd.

At least one analyst thinks an EDS acquisition could be the foot-in-the-door HP needs when it comes to bolstering its services and storage businesses.“It could certainly bolster HP's services offerings, not to mention the opportunity to displace existing EDS suppliers with HP-branded technologies,” writes StorageIO Group analyst Greg Schulz, in an email to Byte and Switch.

EDS is currently involved in some of the world’s largest and most data-intensive technology projects, such as GM’s $15 billion IT overhaul and the massive U.S. Navy and Marine Corps Intranet (NMCI).

HP is clearly looking to challenge IBM’s lucrative Global Services division by grabbing EDS, although the Palo Alto-based vendor has been down a similar road before, launching a failed bid to buy PwC’s consulting division in 2000.

IBM eventually walked off with PwC’s consulting arm for $3.5 billion two years later, although HP picked up software services specialist Mercury Interactive for $4.5 billion in 2006.

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