Hewlett-Packard Set to Swing at IBM

In December, Hurd told analysts at a briefing that the company's revenue forecast anticipated some small acquisitions this year, but didn't include any major deals.

In a short statement late Monday, H-P acknowledged that it was in talks with EDS.

"There can be no assurances that an agreement will be reached or that a transaction will be consummated. HP does not intend to comment further until an agreement is reached or discussions are terminated," the company said in a press release late Monday. EDS subsequently confirmed the talks in a separate release.

EDS, which is based in Plano, Texas, provides technology outsourcing services to various organizations and had revenue of $22.1 billion in fiscal 2007.

According to IDC's Welch, EDS has developed successful practices around specific industries, such as transportation and aviation, handling key operations such as ticket reservations and maintenance scheduling.

The so-called business process outsourcing is the fastest-growing segment of the technology services industry, says Welch. And it fits nicely into H-P's services group, which is more heavily weighed towards the slow-growing technology support business.

H-P services had sales of $16.6 billion in fiscal 2007, according to H-P.