HP to buy EDS

Tech giant Hewlett Packard is in talks to acquire technology outsourcing company, Electronic Data Systems.

News reported today by Reuters sees tech giant Hewlett Packard increasing its sphere of influence in computing circles, with the announcement that HP is in talks to buy technology outsourcing company Electronic Data Systems for $US12 billion to $US13 billion.

The news spurred a spike in EDS shares, which rose 28 %, taking the company’s value to $US 12 billion.

In the Reuters’ article, David Garrity, director of research at Dinosaur Securities, suggested the acquisition was a good move for HP:

“While Hewlett-Packard has over time built up its own outsourcing practice, this clearly is a move by Mark Hurd to challenge IBM in the services area,”

While analysts suggest the move will also improve the company’s positioning:

“It would put Hewlett-Packard in the sweet spot of an IT spending trend. It would definitely improve their position against IBM,” said CRT Capital Group analyst Ashok Kumar.

“HP has been trying to promote themselves as a major services organisation over the past few years. This will certainly help them with that,” said Chad Hersh, an analyst at Novarica.

Source: Reuters