HP buys EDS in bid to compete with IBM

NEW YORK (CNNMoney.com) - Hewlett-Packard announced Tuesday it is buying Electronic Data Systems for about $13.9 billion in cash, as it aims to step up competition for the computer services business with rival IBM.

HP is paying $25 a share for EDS, a narrow 4 percent premium to Monday's close but a nearly one-third premium over Friday's closing price before reports of a possible deal.

It is the largest purchase for HP since its controversial purchase of Compaq Computer in 2002. It should also allow HP to close much of the gap in lucrative computer consulting business with IBM.