HP offers €8.37bn for EDS

Hewlett-Packard is reportedly ready to close a €8.37 billion (US$13 billion deal for Electronic Data Systems (EDS), founded by Ross Perot in 1962. It is one of the world's largest providers of IT services and pioneered outsourcing.


HP clearly sees the acquisition as a way of simultaneously expanding into a new sector and competing against IBM, which has come to dominate the growing, highly profitable IT services sector.


EDS' share price has fallen by a third in the last year and investors are anxious that it will not fare well in the tough economic climate. Hence its shares rose 28% when news of the negotiations broke.


However, HP's share price fell by by 5%, reflecting the challenges involved in the successful integration of such a huge acquisition. However, HP's "˜merger' with Compaq in 2002 was thought to be very risky at the time, but HP went on to become the world's largest IT company by sales.


The deal could be concluded today.