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HP confirmed today is close to a deal to acquire the Electronic Data Systems Corporation. The information first emerged as a report in the Wall Street Journal. The newspapers claimed that HP is willing to pay for EDS a sum between $12 billion and $13 billion.

HP has issued a statement regarding the report and confirmed that it is engaged in advanced discussions with Electronic Data Systems Corporation regarding a possible business combination involving the two companies.

“HP does not intend to comment further until an agreement is reached or discussions are terminated,” the company added.

In similar terms, EDS also confirmed the talks. “In response to market rumors, Electronic Data Systems Corporation announced that it is in advanced discussions regarding a possible business combination transaction with Hewlett-Packard Company. The company does not intend to comment further unless and until a definitive agreement has been entered into,” the company said in a statement.

“There can be no assurance that a definitive agreement will be entered into,” EDS added.

Based in Plano, Texas, Electronic Data Systems is the world's second-biggest computer-services provider. Its core portfolio comprises information-technology, applications and business process services, as well as information-technology transformation services.

EDS’s portfolio includes clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries and to governments around the world.

In 2006, General Motors awarded EDS a $3.8 billion, five-year contract to provide systems integration services to the automaker and last year EDS signed an eight-year, $1 billion contract with KarstadtQuelle AG, Europe's leading retail and tourism group.

If accomplished, the acquisition would more than double Hewlett-Packard's annual sales in its services unit to almost $40 billion.

According to the latest financial results announced by HP, in the first fiscal quarter HP Services (HPS) revenue increased 11% year over year to $4.4 billion.

Revenue in Outsourcing Services grew 15%, followed by Consulting and Integration and Technology Services, which grew 13% and 9%, respectively, over the prior-year period. Operating profit was $489 million, or 11.2% of revenue, up from $406 million, or 10.3% of revenue, in the prior-year period.

On May 15, HP will announce its financial results for the second fiscal quarter ended April 30, 2008.

EDS shares soared 25.4%, or $4.79, to $23.65, on the news, while HP slipped 2.3%, or $1.13, to $48.00.