A deal would bolster Hewlett-Packard’s competitive position versus rival International Business Machines Corp. (IBM) as a provider of services such as tech consulting and customer support. The transaction could spark further large deals in the technology sector as cash rich, mature companies such as Hewlett-Packard look to acquisitions for growth.
EDS shares are up 27% late Monday, trading around $23.80, while HP shares gave up all of their gains on the news. EDS had an enterprise value of $9.95 billion this morning, according to Yahoo Finance, so a $12-13 billion deal represents a 20-30% premium. EDS made $716 million last year on $22.1 billion of sales.