HP to buy EDS for €9bn

Hewlett-Packard has agreed to buy EDS for €9 billion (US$13.9 billion). Its shares have fallen 12% since news of the talks broke on Monday. Clearly investors are edgy about the challenges ahead - see AnalystWire piece from Ovum.

The proposed deal, which still has to be approved by EDS' shareholders, is the biggest ever in the IT services sector and will more than double the size of HP's services business, in theory putting it in position to challenge IBM's dominance. Big Blue won't stand still though while HP goes about integrating the two and has itself had a rocky road to success in the sector.

The Financial Times said, "[The deal] would also add a relatively low-margin, low-growth business to the sprawling IT conglomerate" and added, "HP chief gave few details about the cost savings HP expects to gain by combining its US$16.6bn [€11 billion] services business with that of EDS".

According to Gartner, the global market for IT services was worth €484 billion (US$748 billion) in 2007, up 10.5% from the year before. IBM has a about €35 billion (US$54 billion) revenue, followed by EDS with €14.24 billion (US$22 billion), then. Accenture and Fujitsu with HP was in fifth place with revenue of €11 billion (US$17 billion).