HP / EDS Combo Would Be No. 2 in IT Services, Behind IBM

Hewlett-Packard (HPQ) is close to buying the IT consulting and outsourcing company Electronic Data Systems (EDS) for $12 billion to $13 billion, according to a brief story this afternoon by the Wall Street Journal. The story said an announcement could come as soon as tomorrow. The story was sourced to “people familiar with the matter.”

In response to the WSJ story, Hewlett-Packard said in a statement that it is in “advanced discussions” about a possible “business combination” with Electronic Data Systems. The company said it does not intend to comment further until a deal is reached or discussions terminated.

An acquisition of Electronic Data Systems (EDS) by Hewlett-Packard (HPQ) would create the world’s number 2 player in IT services worldwide, according to new data from Gartner.

In 2007, Gartner reports, IBM (IBM) was the world leader in IT services, with 7.2% market share. EDS was second, with 3%. followed by Accenture (ACN) at 2.8%, Fujitsu at 2.5% and HP at 2.3%.

HP and EDS together had 2007 services revenue of more than $39 billion; HP had $17.3 billion in services revenue, EDS $22.1 billion. IBM’s service business totaled $54.2 billion in revenue last year.

Accenture was the fastest grower among large players in the category, up 19.7% last year. IBM grew 12.2%. HP grew 8.1%, which suggests they lost ground to IBM. EDS grew 3.4%, the slowest growth rate among the sector’s large players.

Comments

[SivBum]

Shares prices indicate to investors that the deal stinks for HP shareholders. Kudo's to Ross Perot's initial $1K investment.