SAN FRANCISCO — With his biggest acquisition to date, Hewlett-Packard Co. Chief Executive Mark Hurd might prove how ruthless he can be.
Since he took the helm three years ago, Hurd has driven the Palo Alto company back to the top of the computing industry by cutting costs. He's done it relentlessly and without sentimentality, repeating the efficiency mantra every quarter -- even as the company's fortunes improved.
That approach would get its biggest test yet as HP tries to absorb the 140,000 employees of Electronic Data Systems Corp., the Plano, Texas-based technology outsourcing company that HP said Tuesday it would acquire for $13.2 billion in cash.
"This is an order of magnitude bigger than what he has done before," said Fariborz Ghadar, director of Pennsylvania State University's Center for Global Business Studies.
Hurd, 51, indicated Tuesday that job cuts loomed as HP tried to improve its position in the market for data-center management, consulting and other high-tech services.
"We think we know a lot about how to look at overhead and how to look at costs that result from overhead," he said during a conference call with analysts. "So think of us doing a lot of work that we know how to do and have done at HP."
Some investors worried that this time Hurd had bitten off more than even he could chew. They have knocked more than 10% off HP's stock since reports Monday that the two companies were close to a deal. HP shares tumbled $2.56, or 5.5%, to $44.27 on Tuesday.
Including Electronic Data's net debt, HP values the acquisition at $13.9 billion. Electronic Data shareholders would get $25 a share, or $13.2 billion. The combined firm would have 210,000 employees in 80 countries who focus on technology services. That could create an integration headache.
Analysts also fretted that HP was overpaying for Electronic Data by offering a 25% premium over Friday's closing stock price. The company has struggled in recent years and faces stiff competition from technology services companies based in the United States, India and China.
The deal is expected to close in the second half of the year. It would be HP's largest since its $19-billion deal -- overseen by Hurd's predecessor, Carly Fiorina -- for Compaq Computer Corp. Hurd's other big acquisitions include software companies Mercury Interactive Corp. for $4.5 billion and Opsware Inc. for $1.6 billion.
