BUSINESS
EDS to cut 2,700 jobs
19-06-2003
by Andrew McLindon
Computer services company Electronic Data Systems (EDS) is to cut 2,700 jobs, mostly in Europe, and it is not yet clear whether its 400 Irish employees will be affected.
EDS said on Wednesday that the lay-offs, which are in addition to the nearly 5,000 it made last year, were necessary to turn the business around and ensure it could remain independent. It is also planning asset sales that could earn it USD500 million in cash by the end of June and will take up to USD475 million in write-offs and expenses as part of its latest restructuring plan.
The world's second largest IT outsourcing firm has been forced to make these moves after plans by its former chairman and chief executive officer, Richard H Brown, to pursue major outsourcing contracts did not pay off. The business was also hurt by companies in general continuing to reign in their IT spending.
In October 2002, after Q3 profits fell 60 percent, EDS cut 4 percent of its workforce and said it would move some US jobs overseas to lower cost locations. The latest job cuts account for around 2 percent of the company's total workforce. EDS expects to save around USD230 million annually from the reduction.
Although most of these lay-offs will be made in Europe, the firm's Irish operations may benefit from EDS's pledge to transfer an unspecified number of jobs and facilities to offshore centres such as Ireland.
The company employs around 400 people in Ireland between a solutions centre, which services national and international clients, and its local sales force. A spokesperson for EDS told ElectricNews.Net that it was too early to say what implications the job cuts will have on individual locations.
The restructuring is the first major move by the company's recently appointed chairman and chief executive officer, Michael H Jordan. He took over in March following the board's decision to oust Brown.
"What we are trying to do is get all the problem areas behind us this quarter," Jordan told the Wall Street Journal. He added that the restructuring should "dispel" doubts among investors and customers about the company's future as a stand-alone business. Investors have been talking about the possibility of the business being acquired.
Jordan also plans to focus on more profitable markets such as health care and financial services, and tighten relationships with equipment vendors like Dell and Sun Microsystems.
EDS said profit for the second quarter will be USD0.33 to USD0.38 a share, excluding asset sales and restructuring expenses, on revenue of around USD5.5 billion. In Q2 2002, EDS earned USD0.64 a share on sales of USD5.48 billion.
Analysts had expected the restructuring to be more severe and following its announcement EDS shares were up nearly 7.5 percent to USD24.20 in New York. EDS is up 31 percent since the start of 2003, but is well down on the 52-week high of USD49.47.
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