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HP buys EDS for $13.9bn, anyone remembers Compaq?

Yesterday, HP agreed to buy EDS for $13.9bn with EDS shareholders receiving $25 per share in cash and helping HP doubling the size of its services arm in terms of revenue.

HP paid an extra 25 percent for the IT services firm's shares and will be paid by a combination of debt and HP's own money.

The combined revenues of EDS and HP's services reached $38 billion for 2007, employing collectively 210,000 employees in more than 80 countries.

The deal will help HP catch up on IBM; Big Blue still remains the indisputable champion in the world of IT services but the new HP services will prove to be a mighty powerful competitor.

IBM currently lead the IT services sector with 10 percent of the market share, HP and EDS will account for 7 percent with Fujitsu and Accenture coming next.

Wall street was less impressed though as HP's shares plunged by nearly 10 percent since last Friday over fears that the global economic conditions could make the deal perilous.

EDS has been cutting jobs after its share prices went down by more than a third since July last year and the HP acquisition means that there could be more cuts on the way, up to 50,000 according to some sources

Back in 2001, HP, under Carly Fiorina's leadership, embarked on an even more massive challenge by acquiring Compaq in a deal that was worth twice the amount it spent on EDS.

Mark Hurd, the HP boss who succeeded to Fiorina, is taking yet another bet and unlike Fiorina, the EDS acquisition has been done while HP is in good financial shape.

HP to Acquire EDS for $13.9 Billion - HP Press release (opens in new tab)
HP taking aim on IBM with risky $13.2B acquisition of EDS - Associated Press
HP-EDS merger could lead to services job cuts - Computerworld (opens in new tab)
HP-EDS Deal Spurs Range of Customer Reactions - HP (opens in new tab)

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website building and web hosting when DHTML and frames were en vogue and started writing about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium. Following an eight-year stint at where he discovered the joys of global tech-fests, Désiré now heads up TechRadar Pro. Previously he was a freelance technology journalist at Incisive Media, Breakthrough Publishing and Vnunet, and Business Magazine. He also launched and hosted the first Tech Radio Show on Radio Plus.