RealMoney Silver - HP Rebounds After EDS Announcement

HP Rebounds After EDS Announcement
By Alexei Oreskovic
TheStreet.com Senior Writer
5/14/2008 1:50 PM EDT

SAN FRANCISCO -- Hewlett-Packard (HPQ) shares regained some ground Wednesday, a day after the company announced a $14 billion acquisition.

The move to acquire EDS (EDS) would make H-P the No.2 player in the market for technology outsourcing and consulting services, behind IBM (IBM) .

But some investors are not convinced that EDS is a good fit for H-P.

On Wednesday, Banc of America Securities analyst Scott Craig issued a note saying that initial sell-off of H-P shares following news of the deal was an overreaction. While the acquisition has its share of risks, Craig said it also presents H-P with favorable cost-cutting opportunities, according to news reports.

Shares of H-P were up 4.6% at $46.30 in midday trading Wednesday.

H-P's shares are still down roughly 6% since news of the EDS deal surfaced.

H-P was due to report its fiscal second quarter financial results on Thursday. But the company pushed the date out to Tuesday, following its decision to release preliminary numbers earlier this week in conjunction with the acquisition announcement.

H-P said it had sales of $28.3 billion in its recently-ended second quarter, up from $25.5 billion at this time last year. The company said it earned 87 cents a share, excluding costs associated with the amortization of purchased intangible assets, vs. 70 cents in the second quarter of 2007.