HP will buy EDS for 12 to 13 billion U.S. dollars, the negotiation of the two sides is close to the final stage according to a source from foreign media. The acquisition will become the company's largest deal following the HP 2002 acquisition of Compaq for 20 billion U.S. dollars.
The source said that the two companies will soon announce the acquisition, but the terms of the deal are unclear. EDS is an advisory and technical services outsourcing company. According to last Friday's closing price at the New York Stock Exchange, the company's market value is about 9.5 billion U.S. dollars.
After the close on Monday, Hewlett-Packard and EDS issued a statement confirming that the two sides' negotiation on the "possibilities for business combination" has entered the" final stage," but the two companies also warned they can not ensure that it will eventually lead to an agreement. Stimulated by the acquisition, EDS shares rose by 28 percent and closed at 24.13 U.S. dollars as the market closed on monday.
The deal is expected to improve HP's competitiveness in technical advisory and customer support sectors to compete with its rival IBM, and may stimulate on a larger scale M & A transactions in the fields of science and technology, because mature technology companies with plenty cash such as Hewlett-Packard hope to promote growth through acquisitions.
In 2007 fiscal year, HP's revenue reached 104 billion U.S. dollars, of which 16.6 billion U.S. dollars came from the services sector. After the failure of 2000 acquisition of PwC's consulting business, HP has been working to improve services. In 2002, the PricewaterhouseCoopers consulting business was bought by IBM. Since the failure of the deal, Hewlett-Packard has launched a series of small-scaled mergers and acquisitions, including acquisition of software maker Mercury Interactive for 4.5 billion U.S. dollars in 2006.
In 2007 fiscal year, EDS made revenue of 22.1 billion U.S. dollars, and the company is expecting a modest growth this year. Affected by the slowdown of U.S. economy, signed contracts of EDS and its competitors both declined last year. EDS management has all along stepped up efforts in diversification such as entering highly profitable fields like providing technical advice.
By People's Daily Online
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