Price Becomes an Issue in the HP, PwC Deal

HP has lowered its bid for the consulting arm of accounting giant PricewaterhouseCoopers due to a decline in valuations since talks between the companies began several months ago, a source familiar with the situation told Reuters on Wednesday.

Originally valued at about $18 billion in cash and stock, HP is now unwilling to pay more than $15 billion, says the source, who spoke on condition of anonymity.

An exact price tag could not immediately be determined.

Both companies confirmed the discussions in September, but said terms had not been set. At that time, sources said a deal was unlikely to be reached until early November.

A purchase of the consulting unit would significantly boost HP's presence in the fast-growing computer services business. If completed, the deal would make HP the sixth-largest provider of information technology services, up from its current 19th position.

But HP Chief Executive Carly Fiorina on Tuesday warned that price remained a key issue in the deal, saying, "We're re-examining every aspect of the transaction, including price.

"We continue to believe that the strategic rationale for this transaction remains compelling… but we won't complete a transaction unless we're certain that we can provide sufficient return to our shareowners and employees," Fiorina told a Prudential Securities technology conference in New York.

A PricewaterhouseCoopers spokesman said talks between the two companies were continuing. He declined further comment.

A Hewlett-Packard spokesman could not immediately be reached for comment.

Over the past few months, share prices for technology firms and consulting businesses have fallen sharply. In addition to price, HP is also negotiating to retain employees of the consulting unit, the source says.

Like other accounting firms, PricewaterhouseCoopers is under pressure from federal regulators about potential conflicts when an auditing firm also serves as a consultant to clients. The business, which has more than 30,000 consultants, generated nearly $5 billion of Pricewaterhouse's $17.3 billion global revenues in 1999.