Hewlett-Packard Co., the Palo Alto, Calif.-based computer giant, announced it reached a definitive agreement to acquire Electronic Data Systems Corp., Plano, Texas, a major provider of outsourced computer services to Medicare, Medicaid, the Defense Department and other government agencies, for $25 a share, a deal HP values at $13.9 billion and hopes to consummate by the end of 2008 funded with a combination of cash and debt.
HP Chairman, President and Chief Executive Officer Mark Hurd, in a news conference webcast, said the deal for EDS “expands our IT services portfolio” and will “more than double HP’s services business.”
The two companies had combined revenue from services of $38 billion for their fiscal years 2007 of which HP had $16.6 billion, according to an HP news release.
Hurd said the acquisition, “will increase our opportunities in attractive segments such as applications outsourcing and improve our reach across geographies and vertical industries.”
Hurd said the financial benefits from synergies used in the business model for the company going forward are based largely on cost reductions.
EDS will be placed into a newly created HP business unit based in Plano and headed by Ronald Rittenmeyer, EDS’ current chairman, president and CEO, Hurd said.
“Think of us as leveraging our outsourcing business into EDS,” he said. “We look at EDS as just a capability that surpasses ours. Frankly, EDS is more mature and more sophisticated in many of the processes that they bring to market than we are."
EDS was founded in 1962 as Electronic Data Systems by former IBM Corp. sales executive Ross Perot. It was acquired by General Motors Corp., a major customer, in 1984 and split off in 1996 as an independent company.
