HP estimates that the deal , when completed , will give it about 7 percent of the technology services market , compared with IBM 's 10 percent share .
it
hp estimate deal complete 7 percent technology service market compare ibm 10 percent share
HP estimates that the deal , when completed , will give <m> it </m> about 7 percent of the technology services market , compared with IBM 's 10 percent share .
Hewlett-Packard bets EDS will fuel hot streak
With its second-largest deal , computer giant hopes to grab bigger share of the $ 550 billion technology-services market
Riding a hot streak that has doubled its stock price in three years , Hewlett-Packard is rolling the dice on a $ 13.2 billion acquisition of technology services provider Electronic Data Systems .
The all-cash deal , announced Tuesday , represents HP 's biggest gamble under the leadership of Mark Hurd , who was hired as chief executive in March 2005 to turn around the maker of personal computers and printers .
Hurd has relentlessly cut costs while demanding better execution from the company 's remaining workers .
Meanwhile , HP has recovered from a nagging financial hangover that was exacerbated by the biggest acquisition in its 69-year history -- the $ 19 billion purchase of Compaq Computer , completed in 2002 over strident shareholder objections .
Hewlett-Packard 's purchase of Electronic Data Systems could mean tougher competition for IBM and its 10,500 Triangle employees .
HP estimates that the deal , when completed , will give <m> it </m> about 7 percent of the technology services market , compared with IBM 's 10 percent share .
That means that if things go well long term , HP could catch Big Blue in the business of providing technology services such as data management , information technology outsourcing and consulting , said Morningstar equity analyst Rick Hanna .
`` While IBM is a clear No. 1 now ... HP-EDS is a real player and potentially a long-term threat , '' Hanna said .
In the short term , IBM has little to worry about , Hanna said , given its clear leadership in technology services , which accounts for about 60 percent of its revenue .
Now HP will try to show that it learned from its mistakes by making the second-largest deal in its history pay off more quickly .
Investors are worried that HP is taking an unnecessary risk on EDS , whose disappointing profit margins had caused its stock to drop by about 30 percent in the past year .
HP shares sagged $ 2.56 Tuesday to finish at $ 44.27 .
`` It appears to be a very daunting deal , '' said American Technology Research analyst Shaw Wu .
The $ 25-per-share sale price represents a nice payoff for EDS stockholders , who will receive a nearly 33 percent premium compared with the company 's share price before news of the HP talks leaked out Monday .
EDS shares added 26 cents to close at $ 24.34 Tuesday .
Including EDS ' net debt , HP values the acquisition at $ 13.9 billion .
Based on EDS ' nearly 530 million common shares , restricted stock units and options , the sales prices works out to $ 13.2 billion .
That represents about one-fourth of the $ 50 billion increase in HP 's market value since Hurd joined the company .
HP prizes EDS because it wants to become a much bigger competitor in technology services -- a wide-ranging category that includes running computer data centers , stitching together software programs and consulting on special projects for business and government clients .