Hewlett-Packard in Talks to Buy Electronic Data

Hewlett-Packard Co. is in talks to buy Electronic Data Systems Corp., in what would be Chief Executive Mark Hurd’s largest acquisition since taking over three years ago.

Computer maker Hewlett-Packard confirmed the negotiations after the Wall Street Journal said the companies were in discussions. The Palo Alto, Calif.-based company may pay as much as $13 billion for Electronic Data, according to a person familiar with the situation who declined to be named.

The acquisition would more than double Hewlett-Packard’s annual sales in its services unit to almost $40 billion. Buying Electronic Data, the world’s second-biggest computer-services provider, will help Hurd, 51, take on International Business Machines Corp. in services, according to Morningstar Investment Services Inc.’s Rick Hanna in Chicago.

“That’s really one of the biggest areas in which they are relatively deficient in competing against IBM,” the analyst said. The move “makes them a little bit larger to compete with IBM on some of these large global deals.”

Electronic Data, based in Plano, Texas, rose $5.27, or 28%, to $24.13 before trading was halted. Hewlett-Packard declined $2.30, or 4.7%, to $46.83 before being halted.

Electronic Data said in a statement it won’t comment further until an agreement is reached.

Hewlett-Packard’s services group reported sales of $16.6 billion in its latest fiscal year, compared with $22.1 billion for Electronic Data. Hewlett-Packard’s services unit accounts for about 15% of total revenue.

Hurd’s biggest purchase was the $4.5 billion acquisition of Mercury Interactive Corp. in November, 2006.