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HP in talks to buy EDS

Hurd's big bite

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Hewlett-Packard's Mark Hurd may be remounting his company's services charge, according to The Wall Street Journal, which says he is close to signing a deal to acquire Electronic Data Systems for $12bn to $13bn.

That would represent as much as a 38 per cent premium over EDS's current market capitalization, at least based on Friday's closing price, and a sign that HP is serious about getting the acquisition completed.

HP confirmed it is in talks with EDS, but said little else. "There can be no assurances that an agreement will be reached or that a transaction will be consummated," a company statement read. "HP does not intend to comment further until an agreement is reached or discussions are terminated."

With HP well into its golden years, the company continues to look for ways to keep revenue growing. It tried to acquire PriceWaterhouse's consulting division in a bid that famously flamed out in 2000 - IBM ended up buying the group two years later. Since then, HP has taken only baby steps in that direction after the company ran into trouble digesting Compaq, and Hurd was brought in to rejigger strategy and the company.

In 2006, HP acquired Mercury Interactive for $4.5bn, and over the weekend, it emerged that the company is poisted to pay £1.5bn to take over datacenters from BT. Last year, HP generated $16.6bn in sales from services, about 16 per cent of its overall $104bn revenue.

The deal would be HP's biggest since buying Compaq for $20bn in 2002. It could be announced as soon as Tuesday, according to unnamed people the WSJ said were familiar with the matter. EDS shares were 28 percent following the report. ®

The smart choice: opportunity from uncertainty

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