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Yesterday HP and EDS confirmed that they had signed a definitive agreement under which HP will acquire EDS for approximately $13.9 billion. The transaction is expected to close in the second half of the calendar year.

The merger will more than double HP's services revenue, which amounted to $16.6 billion in fiscal 2007, according to an HP source. The companies' collective services businesses, as of the end of each company's 2007 fiscal year, had annual revenues of more than $38 billion and 210,000 employees, doing business in more than 80 countries.

The announcement followed quickly on the heels of statements on Monday, May 12, to the effect that the companies acknowledged they were in the later stages of M&A talks. An EDS source conveyed the origninal announcement "in response to market rumors," and both companies emphasized that no assurance could be given that a deal would eventually be consummated. Nevertheless, the announcements confirm rumors that the acquisition process is afoot, and some observers interpret the advanced stage of the talks as something just short of a fait accompli.

"Should HP acquire EDS, it will give them the strong services organization that they've been looking for for a while," commented Matthew Josefowicz, director of insurance practice for New York-based research and advisory firm Novarica, speaking to Insurance & Technology on Monday. "Incidentally, it will also give [HP] a significant foothold in the life/annuity policy administration space with Solcorp [which EDS acquired in 1998]. Combined with its recent purchase of Exstream [Lexington, KY], HP seems to be on its way to becoming a bigger player in the insurance applications space."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio