EDS In Deal With MCI WorldCom; Also Reports Earnings
Information Week
Friday, February 5, 1999
Presiding over his first financial-report
briefing yesterday, Dick Brown, the new
chairman and CEO at EDS, was quick to
note, "I was not here in 1998."
Revenue for the fourth quarter would have
been $4.6 billion but for a $200 million
adjustment to revenue to account for a
lawsuit filed in December against Xerox
Corp. for non- payment of "certain
infrastructure services" and for another,
unnamed contract in difficulty. The $4.4
billion in fourth-quarter revenue following
the adjustment was 4% greater than the
same quarter a year ago; net income for
the quarter after adjustments and charges
was $142 million, compared with $283
million a year ago. Operating margins for
the quarter were 8.9%, down from 11.1% a
year ago. Revenue for the year was up
11% from 1997 to $16.9 billion, with net
income of $743.4 million compared with
1997 net income of $730.6 million.
Rumors of long-standing friction between
EDS and Xerox were borne out by the
disclosure of the lawsuit, filed in a New
York State Court. Details of the suit are
sealed by a confidentiality agreement. EDS
said only that the dispute had not been
resolved after more than a year of
negotiations. Xerox awarded EDS a $3.2
billion outsourcing contract in 1994.
Brown would not comment on reports,
confirmed by sources close to the
negotiations, that EDS and MCI WorldCom
are near agreement on a three-part deal
that involves the sale of MCI Systemhouse
to EDS for nearly $2 billion, the award of a
comprehensive contract for computer
services outsourcing by MCI WorldCom to
EDS, and network services.
-- Bruce Caldwell
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