Hewlett-Packard Co (HP) on Tuesday revealed a US$13.9 billion deal to buy Electronic Data Systems (EDS) in a tie-up that creates a global powerhouse in computer services to compete against IBM.
World leading computer maker HP said it would buy Texas-based business services outsourcing giant EDS for US$25 a share in cash, representing a 32.6 percent premium for EDS shares.
“The combination of HP and EDS will create a leading force in global IT services,” HP chief executive Mark Hurd said. “Together, we will be a stronger business partner, delivering customers the broadest, most competitive portfolio of products and services in the industry.”
California-based HP’s massive data centers and experience in business computing hardware should mesh well with the expertise EDS has in outsourcing technical services for companies, analysts said.
“It is a very bold move but I wouldn’t say it’s a super surprising move given what HP’s core strengths are,” said Crawford Del Prete, IDC executive vice president of worldwide research.
“They complement each other very well. There is a lot of synergy that can go on,” he said.
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.”
HP expects to close the deal by the end of the year.
The acquisition more than doubles HP’s outsourcing services business, which will be aggressively marketed particularly in Europe and the Americas, Hurd said during a conference call with news reporters.
HP’s outsourcing resources will be folded into EDS and the new entity will be run by EDS chief executive Ronald Rittenmeyer.
“It’s too early to tell about job cuts, but we are clearly going to look at some synergies,” Rittenmeyer said during the conference call. “There obviously are going to be some changes. We are continuing to streamline our workforce at EDS and to look at automation.”
Rittenmeyer said the scale gained with HP would let EDS take on large government, healthcare, manufacturing and financial services contracts.
“HP did an important deal in one stroke of a pen and a lot of money is changing hands,” Del Prete said. “HP was struggling in the application outsourcing business and that changes dramatically in this EDS deal. HP becomes a very major player.”
The implications are “only positive” for EDS subsidiaries in India, Rittenmeyer said.
“We feel really good about the opportunity for our people in India,” Hurd said. “It’s a very important country for both of us and we feel very excited about it.”
EDS says on its Web site that it founded the information technology outsourcing industry in 1962 and is now a multibillion-dollar company handling services for banks, hospitals, shops, energy producers and other firms.
EDS handles services ranging from call-in centers and financial transaction processing to “desktop outsourcing” in which EDS provides firms with employee computers and refreshes models every few years.
“That is a big business for EDS,” Del Prete said of desktop outsourcing. “And HP is in the PC business. It’s a marriage made in heaven.”
HP is expected to impose its fiscal discipline on EDS and consolidate the outsourcing firm’s estimated 180 data service centers worldwide.
The companies’ combined services businesses had annual revenue of more than US$38 billion at the end of the fiscal last year.
EDS was founded by Ross Perot, who became a billionaire and US presidential candidate, by paying an incorporation fee of US$1,000 and buying unused computer time at an insurance company to process data for other firms, a company history says.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
UNWAVERING: Paraguay remains steadfast in its support of Taiwan, but is facing growing pressure at home and abroad to switch recognition to Beijing, Pena said Paraguayan President Santiago Pena has pledged to continue enhancing cooperation with Taiwan, as he and Japanese Prime Minister Fumio Kishida expressed opposition to any unilateral change to the “status quo” in the Taiwan Strait using force, Japanese media reported on Saturday. Kishida yesterday completed a trip to France, Brazil and Paraguay, his first visit to South America since taking office in 2021. After the Japanese leader and Pena spoke for more than an hour on Friday, exchanging views on the situation in East Asia in the face of China’s increasing military pressure on Taiwan, they affirmed that “unilateral attempts to change the