The rumours have been confirmed - Hewlett-Packard is in talks to buy the information technology provider Electronic Data Systems or EDS.

The Wall Street Journal reported that the two companies were close to a deal and suggested that EDS may be priced between $12bn (£6.1bn) and $13bn.

The deal has now been confirmed but not the price tag.

However, the news has had an immediate impact on EDS' shares, which rose 27.9% on the day of the announcement.

HP said in a statement: "HP today confirmed that it is engaged in advanced discussions with Electronic Data Systems Corporation regarding a possible business combination involving the two companies".

Analysts are proposing that the deal is part of a bid by HP to become a big IT service provider.

Chad Hersh from Novarica told the Beeb: "HP has been trying to promote themselves as a major services organization over the past few years".

"This will certainly help them with that."