HP Lifts Outlook, Acquires EDS

123jump.com Staff
13 May, 2008
New York City

Hewlett Packard agreed to pay $25 per share or $13.9 billion for technology service company EDS. The purchase price is at 33% premium from the last trading price on Friday. HP with the acquisition of EDS hopes to bolster its service business from $17 billion in 2007 to nearly $40 billion in 2009. The deal is expected to GAAP earnings accretive in 2010.

[R]9:45AM New York – EDS agreed to be acquired by HP at $25 per share.[/R]

EDS agreed to be acquired by Hewlett Packard for $25 per share or an enterprise value of $13.9 billion. The terms of transaction have been approved by the HP and EDS board of directors. The purchase is expected to be completed in the second half of the year.

With the acquisition of EDS, HP hopes to solidify its position in the technology service business and mount effective competition to IBM. In the year 2007 HP service revenue amounted to $16.6 billion and with the EDS the revenue will jump to $38 billion. The service business will be operated under EDS –an HP Company with operations in 80 countries and 210,000 employees.

HP anticipates that the transaction will be accretive to fiscal 2009 non-GAAP earnings and accretive to 2010 GAAP earnings.

EDS stock ((EDS)) added 36 cents to $24.44 and Hewlett Packard stock fell $2.87 to $43.96.

HP also announced its preliminary second quarter earnings. Revenues in the quarter jumped $28.3 billion from $25.5 billion one year ago and earnings per share increased to 80 cents from 65 cents. For the third quarter HP estimates revenue to be in the range of $27.3 billion and $27.4 billion and diluted earnings per share to be between 76 cents and 77 cents.

For the year HP estimates revenue to be in the range of $114.2 billion and $114.4 billion up from $113.5 billion and $114 billion and diluted earnings per share between $3.26 and $3.30.