Electronic Data Systems (EDS), the large and struggling IT services provider, will restructure to reduce costs and improve its bottom line, a plan that includes laying off 2 per cent of its workforce and focusing on its core outsourcing business, the company has announced.
The restructuring actions will result in pre-tax charges and asset write-downs of between $US425 million and $US475 million in 2003, which will have an after-tax impact of between $US0.58 and $US0.64 per share, a portion of which may be recognised in the current quarter.
EDS has been struggling on several fronts for the past year or so. Its stock price has shrunk, its sales have been below expectations and it is being investigated by the US Securities and Exchange Commission.
The company made the restructuring announcement on Wednesday morning before the start of a meeting with financial analysts in New York.
"We hope to dispel a lot of the uncertainty that has been swirling around the company," chairman and chief executive officer (CEO), Michael Jordan, said.
EDS will refocus on its core outsourcing business, which generated about 80 per cent of its revenue, Jordan said. The company must present one face to its customers, whereas now it had a fragmented and scattered approach to the market.
"We have to have clear priorities and convergence throughout the organisation which we don't have today," he said.
The retooling would not be completed overnight, Jordan said.
"This will be a multi-year task to restore our company to a leadership position," he said.
Jordan took over from former chairman and CEO, Dick Brown, in March.
Brown had been in charge since January 1999.
Along with Jordan came Jeffrey Heller to step in as EDS president and chief operating officer (COO), posts Heller had held between 1996 and 2000.
Heller retired from EDS in February 2002 after 34 years with the company. The COO and president positions had been vacant since then. EDS is the world's second largest IT services provider, behind IBM's Global Services unit.