HP Finalizes $14 billion Purchase of EDS

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Today HP announced the closing of a $13.9 billion acquisition of Electronic Data Systems Corp, ending the process that officially began in May.

Under the terms of the deal HP payed $25 per share in cash, and will set up a new business group titled EDS, an HP company. HP hopes the purchase will better enable them to grapple with market leader IBM, who currently owns over double HP’s market share. The companies will combine to provide outsourcing, application development, consulting, and integration services to a variety of industries.

Both firms provide a variety of services geared to help companies run their networks, manage data, and process information, so expanding their reach should prove beneficial for HP. However in the past few years EDS has undergone significant reconstruction to improve profitability. They have lower margins than HP and have been growing at a slower pace, which could make the acquisition a liability if these trends are more than temporary.

HP may have also been enticed by the cloud computing possibilities associated with EDS’s many data centers stationed around the world. Cloud computing would drastically change the margins and potential market opportunities for consulting and outsourcing services, and allow HP to utilize EDS is much larger ways. HP has stated that they expect the deal to turn profitable by 2010.

  • Basil

    1- Yay! Enterprise content on TechCrunchIT! /approve
    2- Hardware is swift becoming a commodity. Many large software vendors like Oracle are pushing their solutions to handle distributed and less efficient hardware intelligently (for example Oracle RAC), and this is pushing enterprises from their proprietary server and storage platforms to cheaper, more “disposable” ones. The best way HP et al can safeguard their profitability if this trend continues is to focus on things that can’t be commoditized as easily like services and software.

  • http://www.techcrunchit.com/2009/09/28/xerox-playing-catch-up-buys-acs/ Xerox Playing Catch-Up: Buys ACS

    […] companies. Deals such as the recent Dell acquisition of Perot Systems and last years purchase of EDS by HP were much less radical as the initial products had far more […]

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