Deutsche Telekom to acquire EDS?

Well that was the substance of the article D Telekom sounds out EDS about takeover in the Financial Times yesterday. Their argument was that DT wanted to bolster its IT services arm – T-Systems –and taking over the much larger EDS, in what would in effect be a reverse takeover of T-Systems, was the way to do it.

I have long suggested that we are about to see a period of consolidation in the top ranks of the global IT services players – in much the same way as we have seen in software. EDS is an obvious candidate for such consolidation (as are CSC and Atos Origin to name but two others) However, I just don’t see DT being the buyer. Firstly, they don’t have the cash, borrowing power or shareholder support. Secondly, I can’t see EDS going willingly to that new home.

What the article might do, however, is to jolt some others into long overdue action. EDS has a current market value of c$10b (and falling) on revenues of c$22b. Or, put another way, a PSR of ‘just’ 0.45. It has overcome many of its management problems, has a great pedigree and its ‘large project management’ experience is second to none. It has a growing presence in India and has a good profile spread across many industries and geographies. In other words it is a tasty target.