Posted by: Rob Hof on May 12, 2008
With the big exception of that pretexting scandal in 2006, Hewlett-Packard has kept a remarkably low profile under CEO Mark Hurd. That may be about to change shortly, as the Wall Street Journal reports HP is close to a deal to buy Electronic Data Systems. (UPDATE: HP on Tuesday morning reported it’s a done deal.) At about $12 billion to $13 billion, or a 30% premium to EDS’s stock as of Friday’s close, the deal would be HP’s largest since the much-debated $20 billion Compaq purchase in 2002 under former CEO Carly Fiorina.
HP’s aim with the deal looks pretty clear: Bolster its services vs. IBM by adding one of the leading technology consultants and outsourcers. EDS sales of $22 billion last year, which would provide quite a boost to HP’s own $17 billion services business. The big question will be whether an EDS deal will be enough to help Hurd overcome the doubts of some investors about HP’s growth prospects this year, thanks to a faltering economy and a more competitive Dell.
In any case, the deal certainly would be a departure for Hurd, who has been focused on making operational improvements to HP so far during his three-year tenure. Bet he’ll have lots to talk about on HP’s earnings call on May 20.