Hewlett-Packard is in talks to buy technology outsourcing company Electronic Data Systems Corp for $12 billion to $13 billion in a deal which would vault it to a close second to IBM in technology services.

The acquisition would be HP's biggest since its $19 billion acquisition of Compaq in 2002.

The Wall Street Journal first reported the discussions, and later HP and EDS both said they were in talks about a business combination but gave no details.

A bigger HP could compete better against IBM in going after large clients and help it keep costs in line.