In a surprise move, Electronic Data Systems Corp. announced Thursday that it has replaced its chairman and CEO Richard H. Brown with former CBS Corp. chairman and CEO Michael H. Jordan.
The Plano, Texas, outsourcer also named former EDS executive Jeffrey Heller as its president and chief operating officer.
EDS has operated over the last six months under a cloud of financial worries, including an unexpected drop in revenues and earnings last August, which spurred a Securities and Exchange Commission investigation into its financial reporting and fueled Wall Street worries about its cash flow.
"EDSs business is solid, but (the board of directors) believed a new leadership gives them a better opportunity to move EDS forward unencumbered by past events," said Jeff Baum, an EDS spokesman in Plano. "We feel (Jordan) has strong leadership skills, and hes an excellent strategist," he added.
EDS, which also holds long-term outsourcing contracts with WorldCom Inc. and US Airways Group—both in Chapter 11, has failed to generate its share of significant outsourcing contracts in the last few months, believes Julie Giera, vice president and research fellow at Forrester Research, in Cambridge, Mass.
"Business Process Outsourcing (BPO) is growing 20 to 25 percent, IT outsourcing is growing over 20 percent a year. These guys should be up there signing their share of business, but in the last six months you dont see EDS with these very large deals. They have more BPO capability than anybody—$3 billion in business. But nobody knows about it," she said.
EDS brought Brown on in 1999 to boost the companys market share in the outsourcing business, and under his guidance the company was successful in signing a healthy number of large contracts, including the Navy Marine Corps Intranet—one of the largest outsourcing deals ever at $6.9 billion. But EDS also during that time failed to effectively integrate and leverage its A.T. Kearney management consulting acquisition, which has seen shrinking revenues over the last several quarters.
"Its hard for a client when working with ATK to see that the next step is to work with EDS. They are trying to build in that next step, but from a market point of view it hasnt appeared to make any impact," said Dean McMann, president of The Ransford Group, in Houston.
Jordan, who retired from CBS Corp. at the end of 1998, also held several senior executive positions at Pepsico Inc. as well as at McKinsey & Company.
"He presided over one of the most successful business transformations in business history at Westinghouse and CBS," said EDSs Baum.
The appointments are effective today.