PC World reports that Hewlett-Packard is currently in talks to acquire IT services company Electronic Data Systems. According to a recent report in the Wall Street Journal, the price for EDS could reach up to about US$13 billion.The deal aims to make HP more competitive against worldwide services market leader IBM.
Though the merger would boost HP’s position against IBM, the combined companies’ global services revenue would fall short about $10 billion of IBM’s, based on 2007 figures, according to Dana Stiffler, research director with AMR Research.
The PC world article notes that the market at stake was worth $672.3 billion worldwide in 2006, a 6.4 percent increase from 2005 according to a Gartner study released about a year ago. While IBM led the market with about $48 billion in revenue compared to second-place EDS with about $21 billion, EDS’ 7.6 percent growth outpaced IBM’s 1.8 percent growth. HP took in about $16 billion in services revenue and grew 2.1 percent between 2005 and 2006.
The deal would improve HP’s services capability in many ways but would not improve certain areas. The struggling EDS would strengthen HP in custom application services and infrastructure management services, but not as much so in managing packaged applications from the likes or Oracle and SAP, Stiffler said.
Though cosidered a bold move, HP, which earns $17 billion in revenue in 2007, has the wherewithal to acquire EDS, which is second in outsourcing revenue at $22 billion. That would make it the second-largest services company in the world, bringing it closer to IBM, which earned $54 billion in services last year. (PC World)
Since HP’s services focus mainly on product support, many experts argue that the EDS acquisition could give HP the professional services revenue needed to be thought of as a serious threat to IBM. HP will also be able to utilize EDS’ global network to expand its presence and extend its services.
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www.pcworld.com/businesscenter/article/145779/hp_in_talks_to_buy_eds_for_up_to_13_billion.html