Wednesday, 21 November 2007

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.

1 comment:

optimax said...

A Texan company taken over by the Germans? EDS may be Global, but the decisions still get made in Plano.

I've worked for EDS for nine years and in five countries, including five years in EDS Germany. So I know the cultural landscape of EDS pretty well. This deal would really struggle with ownership out of Germany, interesting as it would be for me personally. Don't watch this space...