EDS: We're not for sale

NMCI Web site

Related Links

EDS, struggling to right itself despite losing millions of dollars from the Navy Marine Corps Intranet project and other contracts, last week outlined its plan for recovery and dismissed rumors that it could be sold.

However, although company officials at the analyst meeting in New York laid out initial steps, they offered few concrete details. And some still believe the company could be sold off, probably piecemeal, despite reassurances.

The $8.8 billion NMCI contract is costing EDS serious money. Michael Jordan, the company's chief executive officer and chairman, said NMCI and a few other contracts have been a "huge strain on the balance sheet." NMCI alone accounted for a $334 million loss in the quarter that ended March 31. Balancing the contract with the company's other operations led to a $126 million net loss for the quarter.

Jordan and EDS chief financial officer Bob Swan said they expect the money drain to ease during the next year. The research and design work for NMCI is largely done, so the project's expenses should fall sharply now, Swan said.

Meanwhile, the company has identified the weaknesses common to its problem contracts. They include insufficient reviews and pressure to close deals, he said. EDS is addressing that by requiring high-ranking company officials to approve contract changes, and by developing standard contract language for key provisions.

EDS officials also plan to revamp the company's European operations, strengthen its business process outsourcing and business transformation services offerings to diversify its portfolio, and take other measures to strengthen its position.

Jordan addressed persistent rumors that the company is on the auction block. "Obviously that [speculation has] been a popular indoor sport and outdoor sport," he said. "If you look at EDS' position on the game board of a consolidating technology industry, there is probably not a real tremendous value added for somebody in that arena to buy EDS."

The problem with EDS' proposed solutions is that they don't address its current problems, nor did officials offer much meat for the skeleton, said analyst Stan Lepeak, a vice president at META Group Inc.

"I wasn't overly impressed with the whole message," he said. "This was supposed to be a new strategy, and the strategy was 'we won't screw up anymore.' What they said in terms of improving risk management and their due diligence, that's great, but it's after the fact. It doesn't help at all."

Despite Jordan's assurances, EDS is a possible takeover target, Lepeak said. He pointed to Jordan's history — as CEO of Westinghouse Electric Corp. in the mid-1990s, Jordan oversaw its acquisition of CBS Broadcasting Inc. and its ultimate demise, subsumed into the broadcasting company.

The Fed 100

Save the date for 28th annual Federal 100 Awards Gala.

Featured

  • computer network

    How Einstein changes the way government does business

    The Department of Commerce is revising its confidentiality agreement for statistical data survey respondents to reflect the fact that the Department of Homeland Security could see some of that data if it is captured by the Einstein system.

  • Defense Secretary Jim Mattis. Army photo by Monica King. Jan. 26, 2017.

    Mattis mulls consolidation in IT, cyber

    In a Feb. 17 memo, Defense Secretary Jim Mattis told senior leadership to establish teams to look for duplication across the armed services in business operations, including in IT and cybersecurity.

  • Image from Shutterstock.com

    DHS vague on rules for election aid, say states

    State election officials had more questions than answers after a Department of Homeland Security presentation on the designation of election systems as critical U.S. infrastructure.

  • Org Chart Stock Art - Shutterstock

    How the hiring freeze targets millennials

    The government desperately needs younger talent to replace an aging workforce, and experts say that a freeze on hiring doesn't help.

  • Shutterstock image: healthcare digital interface.

    VA moves ahead with homegrown scheduling IT

    The Department of Veterans Affairs will test an internally developed scheduling module at primary care sites nationwide to see if it's ready to service the entire agency.

  • Shutterstock images (honglouwawa & 0beron): Bitcoin image overlay replaced with a dollar sign on a hardware circuit.

    MGT Act poised for a comeback

    After missing in the last Congress, drafters of a bill to encourage cloud adoption are looking for a new plan.

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group