HP Stocks Down on EDS Buyout News

Hewlett-Packard stocks had dropped more than 5 percent by Wall Street’s close on Tuesday after the computer giant said it’s buying Electronic Data Systems (EDS).

Shares ended at $44.27, a 5.47 percent decline.

HP announced earlier in the day it would pay approximately $13.9 billion for EDS in a move to challenge IBM’s dominance in computer consulting and services. EDS stockholders will receive $25 for each share of EDS common stock they hold at the merger’s close, which is expected in the second half of 2008.

HP plans to create a new business group, branded as EDS – an HP company, headquartered at EDS’s executive offices in Plano, Texas. Ronald Rittenmeyer, chairman, president and CEO of EDS, will continue to lead EDS. He’ll also join HP’s executive council and report to Mark Hurd, HP's chairman and CEO.

"The combination of HP and EDS will create a leading force in global IT services," Hurd said in a prepared statement. "This reinforces our commitment to help customers manage and transform their technology to achieve better results."

HP said the merger will more than double its services revenue, which totaled $16.6 billion in fiscal year 2007. HP and EDS will offer services including data center, workplace and networking outsourcing across a number of verticals.

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