A move that will create the second-largest technology services provider could affect related exchange traded funds (ETFs).
Hewlett-Packard (HPQ) announced today that it’s going to buy Electronic Data Systems Corp. (EDS) for $13.2 billion, reports Michael Liedtke for the Associated Press. IBM (IBM) dominates the technology services sector.
Hewlett-Packard expects the merger to boost profits in the fiscal year ending October 2010. Once completed, HP estimates it will have a 7% share of the market, second only to IBM’s 10%.
On the downside, the merger will mean layoffs as HP wants to eliminate overlapping jobs and other expenses. HP’s shares are down this morning, but will the marriage pay off in the long run?
Among the technology ETFs that could feel the effects of the merger are:
- PowerShares Dynamic Technology (PTF): down 5.5% year-to-date; HP is 2.7%; IBM is 3.1%
- iShares S&P Global Technology (IXN): down 4.8% ytd; HP 4.5%; IBM 6%
- Vanguard Information Technology (VGT): down 6% ytd; HP 5%; IBM 5.5%
- Technology Select Sector SPDR (XLK): down 6.6% ytd; HP 5.1%; IBM 5.8%
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.