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EDS picks up the pieces after WorldCom debacle

By Maxine Shapiro, KERA 90.1 commentator

Dallas, TX – Plano's own EDS is now on the list of companies that will feel the punch of WorldCom's shady accounting. I'm Maxine Shapiro with KERA Marketplace Middays.

EDS, Electronic Data Systems Corporation, is the number two systems management and services firm in the world, right behind IBM, but number one in the United States. The Plano-based company employs more than 140-thousand people in over 60 countries. Its 2001 revenues were $21.5 billion. That may change, thanks to WorldCom and, of course, EDS accounting.

WorldCom is a telecommunications company and one of EDS's largest clients. In October of 1999, they signed an 11-year, $6.4 billion agreement. EDS was expecting to collect, oh, about $175 million in revenue from WorldCom during just the next two quarters. That probably won't happen.

Now here's a little Catch-22. EDS needs that money. WorldCom possibly doesn't have it. And the only way WorldCom could get it is if it stays in business and WorldCom could not stay in business without being able to send bills or manage call centers which are part of EDS's services. EDS might pull the contract. As Dennis McGuire, who helped negotiate this deal, bluntly points out: "You need computers to run a communication company." You're right, Dennis, but EDS is not a non-profit firm.

And speaking of your deal, in the same contract, EDS must buy $6 billion of WorldCom services. Critics are questioning the ingenious way both these deals were put on the books by EDS.

EDS's lifeboat for the rest of the year might have been a deal they were working on with Proctor and Gamble. Those unsuccessful contract talks ended yesterday.

Analysts are rallying behind EDS, but it's definitely a tough road ahead. For KERA Marketplace Middays, I'm Maxine Shapiro.


Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 P.M.