HP takeover of IT service provider EDS goes through
The world's largest PC manufacturer, HP, sealed a merger deal yesterday – Wednesday, 14th May – with US IT service provider EDS. At a joint press conference, the two companies stated that HP would purchase EDS for $13.9bn ($25 per share and assumption of debt). The terms of the takeover, slated for completion in the second half of the fiscal year, were signed off by the boards of both companies.
According to the press statement, the takeover will allow HP to more than double its revenues in the service sector. Added together, revenues from both companies in this sector would total $38bn; with a total of 210,000 employees in 80 countries. Since company mergers are always based on increased synergy, waves of job cuts are likely to follow. The company had nothing to say on that score.
HP boss Mark Hurd stated that, "The combination of HP and EDS will create a leading force in global IT services." Hurd's comment was likely directed at IBM, which has jettisoned most of its hardware business in recent years to become a significant service provider in the IT sector. Until now, HP has occupied fifth place worldwide in IT services.
Last year there was speculation that Deutsche Telekom was interested in EDS. HP's largest takeover was the purchase of computer manufacturer Compaq in 2002 for some $20 bn. That buyout made HP less dependent on its core business in printers. In future, EDS will be its own division within the HP Group and will continue to be headed by current CEO Ronald A. Rittenmeyer.