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EDS cuts 2000 jobs, blames spending slowdown

EDS cuts 2000 jobs, blames spending slowdown

Electronic Data Systems (EDS) will cut 2000 jobs, or about 1.4 per cent of its workforce, a move due to a spending slowdown and unrelated to the IT services provider's relationship with WorldCom, EDS executives said during a conference call yesterday.

"It's related to contracts, and some of our clients have pulled back spending -- you all know that -- and we have to adjust our workforce to workloads and that's what this is about," said Dick Brown, the company's chairman and chief executive officer, during the call with financial analysts, which was broadcast over the Web.

The price of EDS' stock has dropped significantly since WorldCom announced last week it had discovered billions in accounting irregularities and that it would restate its financial results for 2001 and the first quarter of 2002.

EDS' stock closed at $US46.63 on Tuesday, June 25, before WorldCom made its announcement later that day. It has dropped steadily since then, closing on Monday at $30.45. It stood at $29.30, down 3.77 per cent, in mid-afternoon trading on Tuesday.

WorldCom awarded an 11-year, $6.4 billion IT outsourcing contract to EDS in October 1999. EDS expects WorldCom to contribute between $160 million and $175 million in revenue and $0.03 to $0.04 of earnings per share in each of the last two quarters of 2002.

Wall Street's concerns centre on the possibility that, depending on WorldCom's fate, EDS may not reap the expected revenue from the IT outsourcing contract and that the services WorldCom provides to EDS may be affected.

The EDS layoffs will affect mostly employees in North America and "across the board" in terms of the types of jobs, Brown said, adding that "this action has absolutely nothing to do with our relationship with WorldCom".

"We're still hiring people in various accounts and markets for specialties," Brown said. "An adjustment of 2000 people -- I don't like it. None of us like it. But it's the kind of practice we've had ongoing. When you have a 140,000 [employee] base, there's where we are."

This round of layoffs isn't an extraordinary measure, Brown said. "It's the same kind of action we've taken in the past and will likely take in the future. This is not unusual for our business."


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