HP to Buy EDS for $13.9 Billion

Colossal tech deal combines two services businesses in what observers expect will be a market showdown with services leader IBM.

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Posted on May 13, 2008

For Electronic Data Systems Corp., it’s back into the arms of a larger corporate parent.

Under the terms of a definitive agreement announced today, Hewlett-Packard Co. will buy the Plano, Texas-based computer services giant for $13.9 billion, 12 years after EDS became independent of General Motors Corp.

The years following its spin-off from GM have been challenging ones for EDS. Heightened competition by such companies as IBM, financial losses, and top executive changes marked the company’s experience in the early years of the new century. A new management team installed in 2003 accomplished a financial turnaround by 2006, but growth beyond single digits has remained elusive.

Today the question about EDS’ future prospects was answered. HP will pay $25 per share for EDS, a 32.5% premium over last Friday’s $18.86 share price. The computer services giant, with $22 billion in 2007 revenue, will form the basis of a new business group within the $105 billion HP, to be called EDS, an HP company.

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