HP prepares for £7.5bn EDS takeover

Hewlett-Packard is in advanced talks to acquire IT services company Electronic Data Systems in a deal that would give HP more competitive muscle against worldwide services market leader IBM.

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Hewlett-Packard is in advanced talks to acquire IT services company Electronic Data Systems in a deal that would give HP more competitive muscle against worldwide services market leader IBM.

The price tag for EDS could be around US$13 billion, according to a [report] in the Wall Street Journal published on Monday.

Both companies issued statements Monday confirming that they are in "advanced discussions" about a merger. They said they would not comment further until a deal is reached or the discussions end, and they each cautioned that there is no guarantee that they will come to an agreement.

The deal would strengthen HP's competitive position against IBM, whose Global Technology Services division has long been a strong profit generator for the company.

"I see it as an attempt by HP to really go head to head with IBM in a much more meaningful way, especially in technology services and IT outsourcing, said Dana Stiffler, research director with AMR Research.

Even after the merger, however, the combined companies' global services revenue would fall about $10 billion short of that of IBM, based on their figures reported for 2007, she said.

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