Dick Brown out as EDS chairman and CEO

Embattled Electronic Data Systems Corp. has a new chairman and CEO: Michael H. Jordan, the former chairman and CEO of CBS Corp., who retired in late 1998. He replaces Dick Brown, whose exit was mutually agreed upon by him and the EDS board of directors, EDS said in a statement late yesterday. Brown was named EDS chairman and CEO in December 1998.

In addition to his tenure at CBS, Jordan also worked at PepsiCo Inc., where he served in a variety of positions, including chief financial officer and president and CEO of PepsiCo WorldWide Foods.

Also coming out of retirement is Jeffrey Heller, who will be EDS's president and chief operating officer. Heller retired from EDS in February 2002 after 34 years with the company. He was serving as vice chairman at the time and had held the posts of president and COO between 1996 and 2000. The COO and president positions had been vacant since then.

In the statement, EDS Director Roger Enrico said Jordan and Heller, who are already on the job, have "the opportunity to move EDS forward unencumbered by past events."

Plano, Texas-based EDS is the world's second-largest provider of IT services, behind IBM's Global Services unit. It has been struggling on several fronts for the past year or so, with its stock price down, sales below expectations and an investigation under way by the U.S. government. Several financial analysts had blamed Brown for the problems and said he had lost credibility.

Chief among EDS's problems is an ongoing probe by the U.S. Securities and Exchange Commission, disclosed by the company in October. Back then, EDS said the SEC was looking at two issues: a steep earnings and revenue shortfall EDS had announced several weeks earlier for its third and fourth fiscal quarters of 2002 (see story), and investment-banking bets EDS made on the value of its stock, which eventually backfired and cost the company about $225 million to settle.

EDS blamed the earnings and revenue shortfall on a variety of issues, including tough economic conditions globally, sagging new sales and lower growth on existing contracts due to cuts in clients' discretionary spending, particularly in Europe. It also cited increased internal spending to bolster its sales team. The company closed the 2002 third fiscal quarter with earnings of 18 cents per share, down sharply from the original expectation of 74 cents per share. Revenue for that quarter came in at $5.41 billion, down from the original forecast of $5.8 billion to $5.9 billion.

The company also announced plans to lay off between 3% and 4% of its workforce, or up to 5,520 employees out of the total of about 138,000 the company had at that time. And it has been affected by the bankruptcy of several big clients, including WorldCom Inc. and UAL Corp.

EDS's troubles are blamed for its loss of a multibillion-dollar outsourcing contract that Procter & Gamble Co. was about to award it late last year. Just last month, during the company's annual meeting with financial analysts, Brown had to open his remarks with the news that final negotiations between EDS and French company Alstom SA over a multibillion-dollar outsourcing contract had collapsed. That put a damper on the entire day and once again placed Brown in a difficult position.

In January, EDS replaced its chief financial officer, Jim Daley, with Robert H. Swan. Daley stayed on board as executive vice president for client sales, global solutions and marketing.


Copyright © 2003 IDG Communications, Inc.

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