Hewlett-Packard is believed to be in final discussions to acquire Electronic Data Systems (EDS), the technology outsourcing group, for at least $12 billion (£6 billion).

The printers giant is in talks about taking over EDS so that it can compete more aggressively with IBM, the world’s biggest computer services company.

Such a deal would represent the biggest deal acquisition for Hewlett-Packard since it took over Compaq for $19 billion in 2002. It would also be the first major deal for Mark Hurd, the chief executive of Hewlett-Packard.

Reports of an impending deal lifted shares in EDS on Wall Street yesterday, the stock jumping by almost a third, valuing the group at about $12 billion.

However, shares in Hewlett-Pack-ard slipped by about 5 per cent yesterday on fears about the long term value to the computer group of such an acquisition, and worries whether Mr Hurd would be overpaying for the company. The $12 billion valuation would see Hewlett-Packard paying a premium of at least a third for the group, compared with its closing share price on Friday.

The share price moves yesterday forced Hewlett-Packard to issue a statement, confirming the talks. A spokesman would not say how advanced the discussions had become, or whether Wall Street expected a final takeover statement to be published today.

In the statement, Hewlett-Packard said: “HP today confirmed that it is engaged in advanced discussions with Electronic Data Systems Corporation regarding a possible business combination involving the two companies. There can be no assurances that an agreement will be reached or that a transaction will be consummated.”

While computer companies are particularly sensitive to an economic downturn – with corporations very reluctant to commit to new technology amid uncertain markets – technology services tend to be far more stable and can produce high margins. EDS has suffered a bumpy ride over the last year, in the face of stiff competition from India. The group admitted last month that profits had fallen by 62 per cent during the first quarter of the year. It also sought to cut costs with a significant redundancy programme and managed to secure a major contract with the US Navy.

David Garrity, the director of research at Dinosaur Securities, said of a deal with EDS: “While Hewlett-Packard has over time built up its own outsourcing practice, this clearly is a move by Mark Hurd to challenge IBM in the services area.”

Ashok Kumar, CRT Capital Group analyst, added: “It would put Hewlett-Packard in the sweet spot of an IT spending trend. It would definitely improve their position against IBM.” A deal orchestrated by Mr Hurd would underline the company’s break from its recent turbulent past. Three years ago, Hewlett-Packard endured its worst episode, sacking its celebrity chief executive Carly Fiorina, knifing its chairman, and becoming embroiled in a phone-bugging and identity theft scandal that saw board members account for secret surveillance of each other in front of Congress.

At the weekend, it emerged that Hewlett-Packard was also in talks to buy BT’s data centres in the UK for about £1.5 billion. BT has a four year alliance with Hewlett-Packard and the proposed deal would see HP acquire the telecom group’s data storage business. It is thought that should a transaction be successful, Hewlett-Packard would inherit 400 staff from BT.

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