EDS Shares Rise 7.8% on Rumors of a Sale to IBM

Electronic Data Systems Corp. shares rose 7.8% on speculation that the world’s second-largest seller of computer services might be bought by larger rival IBM Corp.

Electronic Data gained $1.21 to $16.70 on the New York Stock Exchange on Friday; it traded as high as $17.35. The stock had declined 77% this year and hit a 16-year low Sept. 24.

There is a “low probability” of IBM acquiring Electronic Data, said John B. Jones, an analyst with SoundView Technology Group Inc. who rates IBM “outperform” and says he doesn’t own the shares. “The cultures are very different.”

IBM is busy integrating last month’s $3.5-billion purchase of PricewaterhouseCoopers’ business-consulting unit, Jones said.

Speculation that rivals will merge occurs when one company’s value falls sharply, said Jeffries & Co. analyst Joseph Vafi, who rates Electronic Data shares “hold” and said he doesn’t own them. The company’s stock fell this year after it reported slowing profit, cash flow and sales. Vafi said he disagrees with the speculation about Electronic Data.

“The key point isn’t the rumor but that people are wanting to find a reason to take the stock higher,” Vafi said. “Electronic Data’s board would never dream of an acquisition at these levels.”

Electronic Data “is not for sale,” said Sean Healy, a spokesman for the Plano, Texas-based company. IBM spokeswoman Carol Makovich declined to comment.

Shares of Armonk, N.Y.-based IBM fell 47 cents to $84.43 on the NYSE. They have fallen 30% this year.