Hewlett-Packard closes EDS purchase

WASHINGTON (MarketWatch) -- Hewlett-Packard on Tuesday completed its $13 billion-plus acquisition of Electronic Data Systems Corp., a move expected to increase its ability to compete with rival IBM Corp.

HPQ 46.77, -0.04, -0.1%) the second largest global provider of IT services after IBM (IBM:International Business Machines
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IBM 121.66, -1.20, -1.0%) . It's part of a push by H-P Chief Executive Mark Hurd to expand the company's core business beyond the printer and computer markets.
The deal also boosts the combined company's payroll to 300,000 employees, although some reductions are expected as H-P combines overlapping operations of H-P and EDS. H-P is slated to disclose further details on how it plans to integrate EDS at a mid-September meeting with financial analysts.
The ability to sharply cut costs is seen as crucial to H-P's goal of making the merger deliver clear benefits to shareholders. The EDS business has lower profit margins than H-P and is not growing as fast.
The IT businesses of both H-P and EDS provide an array of services to help companies around the world run their networks, manage data and process health and financial information, among other things. An enlarged H-P now controls about 7% of the technology-outsourcing market, compared to about 10% for IBM.
The EDS acquisition is H-P's largest since the company bought Compaq Computer for $19 billion in 2002. It is also the largest acquisition since Hurd became H-P's CEO in April 2005.
The new business group that incorporates the EDS unit will be led by Ronald Rittenmeyer, the former CEO of EDS who helped orchestrate the deal.