HP closes $13.9 billion deal for EDS

HEWLETT-PACKARD (HP) said today that it closed the $13.9 billion buyout of Electronic Data Systems (EDS).

In completing its acquisition of the Plano, Texas based information management company, printer ink company HP bought a book of business that it was never able to generate by itself.

HP has hopes that acquiring EDS will better position it to compete with IBM, whose Global Services division produces approximately half of its revenues and the majority of its profits.

It won't be clear for a while whether HP got a good deal in buying EDS or overpaid, as that will largely depend upon how well HP can integrate EDS with its own consulting business.

Though HP is no longer the almost laid back company it was when "The HP Way" guided its management, it's still a much more collegial company than EDS, which has a well-deserved reputation for being uptight nearly to the point of being paramilitary in its internal culture.

HP and EDS corporate cultures might clash such that services integration becomes difficult, in which case HP might realise few operating synergies or advantages from acquiring EDS.

Another factor will be whether EDS revenues and margins hold up during the deepening US recession, although the impact of US economic weakness on EDS results will be buffered to some extent by the strength of its business operations outside the US.

HP said it will further reveal its plans for EDS at a meeting with analysts on September 15. µ