HP acquires IT service provider EDS for $13.9 billion – update

HP has announced that it is acquiring IT services provider EDS for $13.9 billion. The resulting company would be better able to compete with IBM in IT services.

The company has this Tuesday announced after it was already forced on Monday a declaration to spend on the negotiation talks after a publication from The Wall Street Journal. This newspaper had learned from informed sources that HP wanted to acquire EDS for approximately $ 13 billion. The takeover bid is therefore more than 30 percent higher than the closing price at the time of publication of the takeover plans by the WSJ.

EDS is currently the second largest IT service provider in the world with a 3 percent market share, while HP is fifth with 2.3 percent. Market leader IBM controls 7.2 percent of the market. The ICT services sector is expected to grow at more than 8 percent annually over the next five years and HP wants to get a share of this. HP currently gets ‘only’ $16.6 billion from IT services out of a total 2007 revenue of $104 billion. In contrast, ICT services at IBM already account for half of the turnover. EDS has an annual turnover of 20 billion dollars and can include former parent company General Motors and Shell among its customers.

The acquisition of EDS is reminiscent of the takeover of Compaq by HP in 2001. The mammoth takeover involved $ 18 billion and the integration of Compaq cost HP a lot of headaches. Former HP CEO Carly Fiorina had to leave the field because of this, but also bet on the Itanium processor for HP’s high-end servers and a spy scandal high level will have hastened her departure. It is up to the current CEO Mark Hurd to manage the acquisition and integration of EDS in the right direction.

Update 9.45 pm: HP has now confirmed the acquisition.