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May 13, 2008
Hewlett-Packard (HP), a global technology leader with major businesses operations in computer hardware, software, printing and services announced today that they will aquire Electronic Data Systems (EDS) for US$13.9 billion in an all cash deal. The Wall Street Journal has reported that the deal has been in various stages of development since October 2007 when the CEO of EDS, Ron Rittenmeyer, approached HP CEO Mark Hurd with a proposition to join forces.
This acquisition models a strong pattern of robust M&A activity since the arrival of current CEO Mr. Hurd. Since his arrival in 2005, HP has worked to expand their overall IT portfolio through organic R&D growth and the purchase of "best of breed" companies such as Mercury, Opsware.
ProCurve and Peregrine.This purchase will bolster the services arm of HP placing the company in second place worldwide behind IBM in terms of IT services. The added revenue will work to double Hewlett-Packard's sales from services to almost $40 billion, about as much as it gets from PCs. The combined forces of EDS and HP will represent a total worldwide workforce of 309,000 people in more than 80 countries representing 7% of the worldwide IT Service market.In 2006
HP surpassed IBM as the largest technology company in the world in terms of overall revenue and since that time the two industry titans have fiercely battled for market dominance. Analysts at Briefing.com said: "Adding EDS would expand HP's service offering and also increase its market share in the industry, helping it better compete with industry heavyweight IBM."
Like any deal of this size it is not without its optimists and pessimists. From the positive side American Technology Research analyst Shaw Wu said. "I am not saying this deal is a slam dunk by any means, but people have underestimated Mark Hurd before."
"EDS is more mature and more sophisticated in many of the processes that they bring to market than where we are", Hurd, 51, told analysts on a conference call yesterday. "We wouldn't do the deal if we didn't think we had an opportunity to improve the operating profit level that EDS currently has."
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