HP to Acquire EDS for $13.9 Billion

According to AMR Research Analysts Dana Stiffler and Phil Fersht, the combination of the HP and EDS services would create the second largest IT and business services company in the world. "EDS, at approximately $22 billion in 2007 revenue, combining with HP at nearly $16.6 billion, makes for a big, deep services play," say Stiffler and Fersht. "This falls short of spitting distance of IBM ($54 billion in services revenue), but certainly makes for a more interesting playing field in IT services. The trick is for both giants to be nimble enough to go after mega and midsize deals against the Indian services providers, which are increasingly competitive with all forms of multinational providers, particularly in application services."

Terms of the transaction have been unanimously approved by the HP and EDS boards of directors. 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. EDS will continue to be led by EDS Chairman, President and Chief Executive Officer Ronald A. Rittenmeyer, who will join HP's executive council and report to Mark Hurd, HP's chairman and chief executive officer.

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.