World leading computer maker HP and Texas-based business services outsourcing titan EDS each issued statements confirming tie-up talks and warning that they could not assure a deal will be reached.

'It is a very bold move but I wouldn't say it's a super surprising move given what HP's core strengths are,' IDC executive vice president of worldwide research Crawford Del Prete said.

'They complement each other very well. There is a lot of synergy that can go on.' California-based HP's massive data centers and experience in business computing hardware would mesh well with the expertise EDS has in outsourcing technical services for companies, according to Mr Del Prete.

EDS says at its website that it founded the information technology outsourcing industry in 1962 and is now a multi-billion dollar company handling services for banks, hospitals, shops, energy producers and other firms.

A merger with EDS would undoubtedly increase HP's power to wrest market share from rival IBM in the 'classic outsourcing space,' Del Prete said.

The price of EDS stock leapt more than US$5 (S$7) per share, more than 25 per cent, as reports spread that HP might pay US$12 to US$13 billion for EDS, signalling the market thinks the computer giant would be paying premium. -- AFP