Xerox Corp plans to buy Affiliated Computer Services Inc in a $6.4 billion cash-and-stock deal that expands the copier company into outsourcing and data center management.

The deal, priced at a 33.6 percent premium to ACS's Friday closing price, is the latest in the active technology services sector. A week ago, Dell Inc said it would buy Perot Systems Corp . Hewlett-Packard Co bought Electronic Data Systems Corp in August 2008.

In its biggest acquisition ever, Xerox will pay 4.935 Xerox shares and $18.60 in cash for each share of ACS, totaling $63.11 per share based on Friday's closing prices, the companies said on Monday. That compares to ACS's record high share price of $63.66 in 2006.

Shares of ACS, which competes with Accenture Ltd and Computer Sciences Corp in data center management, jumped 27 percent to $55.24 on the New York Stock Exchange. Xerox shares fell 14 percent to $7.74.

The deal may help Xerox compete with printing rival HP, which significantly expanded its services segment last year with its $13.2 billion purchase of EDS.

HP strengthened their position in terms of business services (in addition to) printing, said Gabelli & Co analyst Hendi Susanto. Xerox may have to compete with HP, and this will strengthen their position.

Ursula Burns, chief executive of Xerox, said revenue from services will triple to an estimated $10 billion next year from $3.5 billion in 2008.

Customers are saying, 'We need help with the entire document infrastructure.' We've got the technology piece of the back office and the technology piece of automation. We need help with the information piece, Burns said in an interview.

Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's founder Darwin Deason. On an adjusted earnings basis, the deal is expected to add to Xerox's earnings in the first year.

The Norwalk, Connecticut-based copier company has been focusing on its so-called annuity business, in which customers consistently order supplies and services for their printers.

It derives some 70 percent of its cash flow from the sale of supplies, financing and services to repeat customers. But the economic downturn has forced some of its customers to slow their plans to buy new equipment or order service.

The companies expect annualized cost savings of $300 million to $400 million in the first three years after closing, which is expected in the first quarter of 2010. ACS CEO Lynn Blodgett said some jobs will be affected at the Dallas-based company.

After the deal closes, ACS will operate as a standalone unit, run by Blodgett.

J.P. Morgan and Blackstone Advisory Partners acted as financial advisors to Xerox for the deal, Citigroup Global Markets Inc was financial advisor to ACS and Evercore Partners was financial advisor to a special board committee at ACS.

(Reporting by Franklin Paul and Tiffany Wu; Editing by Derek Caney)