HP and Blackstone may bid for CSC, report says

Talks to buy the outsourcing company are at a preliminary stage

Hewlett-Packard (HP) and private equity firm Blackstone Group are reportedly considering bidding for Computer Sciences Corp. (CSC), the second sizable buyout of an outsourcing company said to be in the works this week.

The talks with CSC are at a preliminary stage and could still fall apart, according to a report in Thursday's edition of The Wall Street Journal, which cited unnamed sources. The initial plan is for HP to own a minority stake in CSC, with the option to buy out Blackstone's larger stake at a later date, the sources said.

Representatives for HP in Europe would not comment on the report Thursday. CSC and Blackstone Group could not immediately be reached.

CSC sells IT and business process outsourcing services, as well as systems integration and consulting. It has 78,000 employees in about 50 countries, according to its Web site. Revenue for its 2005 fiscal year was $14.1 billion, up from $13.4 billion in 2004. Net income climbed to $810 million from $519 million. A third of its 2005 business came from U.S. government contracts, with the remainder mostly from corporations in the U.S. and Europe.

The value of the CSC acquisition wasn't known. The company has a market capitalization of nearly $9.4 billion and carries $1 billion of debt, the Journal noted.

HP hasn't made any big acquisitions since 2002, when it bought Compaq Computer for $19 billion. The controversial deal sparked a bitter proxy battle and contributed to the ousting of Carly Fiorina, who was replaced as chief executive officer by Mark Hurd early last year.

HP has said it hopes to further expand its services business, however, an area where it competes with IBM's much larger Global Services organization.

Blackstone is also on the list of equity firms reportedly negotiating a deal to buy Affiliated Computer Services Corp., which provides mostly business process outsourcing services. The acquisition, valued at $8 billion, could be announced by Monday, the Journal said, also citing an unnamed source. That deal also involves Texas Pacific Group, Bain Capital and Silver Lake Partners, the paper said.

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