The transaction is projected to more than double HP's revenue from services, according to a company statement, which further confirmed the Palo Alto, Calif., company's intention to move beyond its hardware background into higher margin services and consulting operations.

The latest move positions HP in a better competitive position against IBM and is the clearest sign the company aims to expand into services to compensate for challenges in its core but lower-margin hardware business.

HP has been trying with limited success to chip away at IBM's leadership in the services and consulting business. In its last fiscal year ended October 31, 2007, HP services reported revenue of $16.7 billion, up 7 percent from $15.6 billion in the prior year.

The acquisition of EDS is likely to make HP even more competitive in the high-tech consulting and services business but the company is unlikely to catch up with IBM immediately or even in the next few years.

The transaction is expected to close in the second quarter. HP expects to retain the EDS brand and said the new division would continue to be led by current EDS chairman, president and CEO Ronald Rittenmeyer.

By: DocMemory
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