Technology services giant Electronic Data Systems has signed a deal to crawl under Hewlett-Packard’s even larger umbrella. Say hello to the new HP, cast in the image of the old IBM.
The deal was approved by both boards of directors, and is now awaiting the thumbs-up from American and foreign regulators, as well as from EDS’ shareholders. The price tag is $13.9 billion, or $25 per EDS share in an all-cash transaction. That includes shouldering about $300 million of EDS net debt, a trivial amount in these lofty price ranges.
HP needs to take on some new debt to finance the deal, as the coffers currently have only $9.9 billion sloshing around. The company will probably also cut back on its share buybacks, where it usually spends about $2 billion per quarter. The final John Hancocks should come in the second half of 2008, giving HP some time to collect the funds.
Most of the PR-based journalists are praising HP’s goal of dominating corporate service.
If I still owned HP stock, I would be interested to find out why they are keeping large cash reserves rather than paying shareholders their dividends, and why they are funding capital growth without market due dilligence.
They are just trying to achieve parity with IBM since they bought PWC.
They ought to change their motto to “BUY” and ditch Carly’s “INVENT” !!! Not that HP is doing much inventing anymore !!! Didn’t Carly have HP Labs bulldozed ?
My advice to the staff @ EDS, start polishing up your resumes now. If this deal goes through there will be massive job cuts. And if you survive the layoffs you may be looking at a pay freeze or cut. This is a good deal for HP and will help the stock in the long term.
Merging the lousy performing EDS with the weak HP services unit does not bode for better health. The leaders are Infosys, TCS, Cognizant and WiPro. HP needs to innovate and better develop its global delivery model – not try to see if it can “fix” the badly performing EDS. REad more at http://www.ThePhoenixPrinciple.com