EDS profits in freefall

The US outsourcing giant, Electronic Data Services, has posted third quarter results showing a 59 per cent fall in profits.

The company said it will reduce its global workforce by three to four per cent, about 5,500 jobs, over the next several quarters.

Up to 1,000 jobs are expected to go before the end of 2002.

EDS announced it would reduce corporate overhead expenses by $75 million next year and divest some assets to raise an estimated $500 million by next summer.

A minimum of 1,500 US contact center positions will also be transferred to 'low-cost solutions centres' in India, Brazil, Ireland and the Czech Republic in 2003.

The company's end of quarter results showed total revenue had decreased five per cent (at constant currency) to $5.41 billion versus $5.56 billion for the previous year.

Contract signings were $3.0 billion, down from $6.8 billion last year.

EDS blamed the results on 'reduced discretionary spending on existing contracts, fewer new sales and increased investments in sales pursuits' as well as 'write downs associated with the US Airways and WorldCom bankruptcies.'

'Costs incurred as a result of underperformance of certain contracts in Europe were also a major factor,' according to a spokesman.

Dick Brown, EDS Chairman and CEO, said: "We are disappointed with our results. We are taking the steps necessary to align our business with current market realities and put this company back on a path to greater profitability."

EDS is the largest supplier of IT to UK Government departments. The company holds the largest Government contract to supply IT services of its kind, worth £2.8 billion, to the Inland Revenue.

It was awarded another Government IT contract, for £90 million, to provide the National Health Service with email for staff soon after it issued a profits warning at the beginning of October.