EDS Seeks Turnaround With New Leaders

Responding to revenue decline and bookkeeping woes, services giant replaces brown with new CEO.

Electronic Data Systems Corp. is trying to shake off its recent dismal financial performance, as well as questions about its bookkeeping, with the shake-up of its executive ranks.


The ousting two weeks ago of Chairman and CEO Richard Brown (pictured) came after six months of financial worries, including an unexpected drop in revenues and earnings last August. That drop spurred a Securities and Exchange Commission investigation into its financial reporting and fueled Wall Street concerns about its cash flow.
The services company has replaced Brown with Michael Jordan, according to officials. The Plano, Texas, outsourcer, which brought Jordan out of retirement after he had served as chairman and CEO of CBS Corp., also appointed a former EDS executive, Jeffrey Heller, as its president and chief operating officer.

"EDS 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. "We feel [Jordan] has strong leadership skills, and hes an excellent strategist."

EDS, which holds long-term outsourcing contracts with WorldCom Inc. and US Airways Group Inc.—both in Chapter 11—has failed to generate its share of significant outsourcing contracts in the last few months, said Julie Giera, an analyst at Forrester Research Inc., in Cambridge, Mass.

"Business process outsourcing is growing 20 to 25 percent; IT outsourcing is growing over 20 percent a year," said Giera. "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."

EDS brought Brown on board in 1999 to help the corporation increase its market share in the outsourcing business, and under Browns leadership, the company was successful in signing a healthy number of large contracts, including the Navy Marine Corps Intranet—one of the largest outsourcing deals to date, at $6.9 billion.

But EDS, also during that time, failed to effectively integrate and leverage its A.T. Kearney Inc. management consulting acquisition, which has seen shrinking revenues over the last several quarters, according to observers.

"Its hard for a client, when working with [Kearney], 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 Inc., in Houston.

Jordan, who retired from CBS at the end of 1998, also held several senior executive positions at Pepsico Inc. as well as at McKinsey & Co.

"He presided over one of the most successful business transformations in business history at Westinghouse [Electric Corp.] and CBS," said EDS Baum.

"I am confident we can address the challenges of the marketplace and grow through innovative new services, while continuing to deliver superior service," said Jordan, in a statement.