Posted on 07/02/2002 1:18:01 PM PDT by RikaStrom
Reuters Business Report
EDS to Cut Work Force by 2,000
NEW YORK (Reuters) - EDS, the world's No. 2 computer services company, said on Tuesday it would cut 2,000 jobs and reassured investors the reductions were not connected to its business with troubled telecommunications company WorldCom Group.(NasdaqNM:WCOME - News).
"This action has absolutely nothing to do with our relation with WorldCom," Chief Executive Dick Brown said during a conference call with analysts. "EDS is a solid company with a straightforward business model. We watch our money and we stick by our clients."
The 2,000 cuts represent 1.4 percent of the workforce of 140,000 at EDS, the world's No. 2 computer services provider.
"This is not unusual for our business," Brown said.
WorldCom's accounting problems have led investors to focus on the way Plano, Texas-based EDS books revenue and expenses from big projects. Brown stressed that "Our accounting at EDS is clear, conservative and concise."
Brown said he expects EDS to continue to work as a contractor for No. 2 U.S. long-distance carrier WorldCom. He said EDS could handle any exposure it might suffer if WorldCom's troubles worsen.
Shares of EDS on Tuesday were down 84 cents, or 2.8 percent at $29.61 in early afternoon trading on the New York Stock Exchange. That came on the heels of a drop of more than 18 percent on Monday, when the company said its 2002 operating earnings could be hurt if WorldCom fails to pay its bills
EDS -- which competes in the market for computer services against No. 1 computer services provider International Business Machines Corp.(NYSE:IBM - News) -- said on Monday that it expected WorldCom, one of its biggest customers, to account for $160 million to $175 million of its revenue in 2002. That translates into between 3 cents and 4 cents a share a quarter for the third and fourth quarters this year, EDS said in a statement.
The company also said it might have to write off about $90 million worth of assets -- computer hardware and software dedicated to WorldCom -- if the WorldCom contract falls through. But it added that based on prior experience, it believed it would be able to redeploy the assets and adjust its costs, "substantially mitigating the financial impact of any change" in WorldCom's service requirements.
WorldCom last week disclosed that it hid more than $3.8 billion in costs and will have to restate results for the last five quarter, erasing all profits from the beginning of 2001. It also said it was continuing its probe its financial records to examine how it handled its reserves in 1999 and 2000.
WorldCom said on Monday it could be delisted from Nasdaq as early as this Friday and that bankers declared the company to be in default of loan agreements.
Under a complicated $6.4 billion, 11-year contract, which the two companies struck in 1999, EDS provides information technology services to WorldCom, such as running its worldwide computer network and providing it with billing services.
In return, EDS' part is to buy up to $6 billion worth of telecommunications services
I did a search on EDS but didn't find this.
Yep, I'd say 7% unemployment is closer than we think.
Well that's bad news; when Worldcom (lack of) business comes home to roost the net job loss will be 4,000.
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