Hewlett Packard is buying EDS. From NPR’s News In Brief:
Hewlett-Packard, EDS Agree To Merge
The nation’s largest personal computer-maker, Hewlett-Packard Co., has agreed to purchase Electronic Data Systems Corp for $12.6 billion, the empire founded by H. Ross Perot, as part of an effort to position the company to take on rival IBM.
The companies said the deal values EDS at $25.00 per share, a 33 percent premium to its closing price on Friday, before reports of merger talks sent the shares soaring on Monday.
EDS would bring its expertise in running computer systems and providing other high-tech help to Palo Alto-based HP. That field is currently dominated by IBM Corp., which generated $54 billion in revenue from technology services last year.
HP indicated it will make significant layoffs as it eliminates overlapping jobs and other expenses.
Now, HP hasn’t really been involved in high-tech outsourcing management. Why would they pick up EDS, at a 33% premium? The only thing I can think of is that the folks over at HP on the board think that IBM’s weak enough in this arena (see many of Cringely’s recent articles about IBM) that merging up with EDS gives them a chance to jump into that market with a big gun… and that the near-sourcing market is going to pick up. That and they realize that the hardware market is high cost low margin, so their core business model needs a little tweaking.