Hewlett-Packard eyes £6.5bn EDS takeover

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The deal, worth some $13 billion (£6.57 billion), would be one of the biggest IT acquisitions in Britain.

EDS, headquartered in Berkeley Square has been operating in the UK since 1984, employing 16,500 people at 200 sites across the country.

The firm, which gets 20% of its revenue from Britain, has been a big beneficiary of government outsourcing in recent years but has a mixed track record.

It provides consulting and tech support for several departments including the Ministry of Justice and the Ministry of Defence, where it is overhauling information systems in a 10-year, $5.76 billion deal.

One of its success stories is the Oyster Card that it developed, marketed and continues to administer for Transport for London, but the company has also had some high-profile setbacks.

It faced anger in the Commons in 2004 over payment problems at the Child Support Agency and in 2003 lost a $3 billion contract to provide services for the Inland Revenue after hitches in the introduction of a tax credits system.

The company was founded in 1962 by one-time presidential hopeful Ross Perot, who sold it in 1984.

It has a string of private sector clients including Scottish & Newcastle, British Airways, BP, Vodafone, Rolls-Royce, Lloyds TSB, Royal Bank of Scotland and Thorntons.

The deal would be the biggest by HP since CEO Mark Hurd took the helm three years ago and would more than double Hewlett-Packard's annual sales in its services unit to almost $40 billion, making it as large a business as PCs and put it head-to-head with IBM.

EDS has faced a rough ride over the past year with competition from India. CEO Ronald Rittenmeyer is firing workers and moving jobs to lower-cost countries and last month admitted that the group's profits had fallen by 62% during the first quarter of the year.

Hurd has also been taking the axe to his workforce, cutting jobs more than 15,000 jobs in 2005, and squeezing costs from data centres, pensions and real estate to save another $3 billion a year.

But he has also been buying companies to expand the services division.

Last year, Hewlett-Packard's sales topped $100 billion for the first time, surpassing IBM as the world's largest supplier of computer technology.