EDS Holding Merger Talks With Sprint : Technology: The proposed deal would require General Motors to spin off its computer services unit.

In yet another sign of affinity between the computer and the telephone, General Motors Corp. said Monday that its computer services unit, Electronic Data Systems Corp., is negotiating a merger with long-distance provider Sprint Corp.

The proposed “merger of equals,” which would require GM to spin off EDS, would create a high-tech behemoth with $20 billion in annual revenue, 120,000 employees and powerful communications and data processing capabilities.

GM purchased EDS in 1984 for $2.5 billion from founder Ross Perot in a rare stroke of luck or foresight to modernize its information processing system. The unit is now valued by analysts at about $15 billion.

To make the merger happen, GM would spin off EDS to holders of its Class E common stock, whose dividends are based on income from EDS. Terms of any merger with Sprint have yet to be agreed upon.

Nevertheless, EDS and Sprint said the merger would strengthen their respective positions in existing markets while enabling them to tackle emerging multimedia markets.

“The combination is formidable,” said Robert Clark, industry analyst at Dataquest Inc., a Silicon Valley market research company.

EDS is already a heavy user of telecommunications. EDS, for example, builds and operates computer systems that connect far-flung factories, dealers, offices and parts suppliers for companies such as GM and Xerox.

The company would use Sprint’s state-of-the-art communications system to cut its phone costs and offer customers one-stop shopping. “Companies want a one-stop provider for all communications and information needs,” EDS Chairman Les Alberthal said.

Sprint’s network and broad customer base would also make it easier for EDS to reach millions of consumers with new services such as home shopping, video on demand, remote home automation and on-demand education, Alberthal said. The company already serves consumers by collecting and processing data from bank automated teller machines.

Sprint, for its part, needs the cash and computer know-how to compete in the long-distance telephone business, where it is now a weak third behind AT&T; and MCI Communications.

“The combined ability to deliver information technology and telecommunications capability on a world level is not currently available,” Sprint CEO William Esrey said in an announcement.

While telecommunications companies such as Sprint can transport information efficiently, says Ken Zita, partner at Network Dynamics Assn., a New York communications consulting company, they don’t have the technology to connect varied computer systems.

In a major step in that direction, AT&T; recently announced that it would develop systems to enable companies using Novell’s popular local area network software to connect their various operations over long-distance lines. AT&T; would, in effect, enable companies to create global private networks without having to hire systems integration providers such as EDS. AT&T; has an edge in offering such services because of its computer subsidiary, NCR.

MCI, by contrast, is a step behind. Although it has been aggressively offering corporations communications services through its joint venture with British Telecom, it has yet to announce a strategic partnership that will enable it to offer more complex data communications.

Sprint and GM cautioned that there are “significant issues to be resolved” before the merger goes ahead. GM, for example, said it needs Internal Revenue Service approval for a tax-free spinoff of EDS before it will go ahead with a deal.