EDS is to axe 5,200 jobs as part of a $1 billion cost cutting measure following poor first quarter results announced this week.
The Texas-based computer services and consulting company saw profit drop 14 per cent during the period to $181 million, compared to $211 in the same period last year.
The quarterly results are the first since the arrival of Dick Brown, who moved from telecoms operator Cable and Wireless to take on the role of chairman and chief executive of EDS on 15 January.
EDS reported revenue for the first quarter of $4.3 billion, up 10 per cent compared to the 1998 level of $3.9 billion. The company made restructuring and other pre-tax charges of $379.8 million, much of this related to the 5,200 redundancies. No timeframe for the $1 billion cost savings - about six per cent of EDS's $17 billion operating costs - has been announced.
The company's European business saw sales grow 29 per cent during the quarter. Asia-Pacific grew by 7 per cent, the Americas excluding the US by 8 per cent, while growth on EDS's home turf grew by just three per cent. "This is not the kind of quarter we want to repeat," Brown said to analysts in New York.
EDS reported new contract signings during the quarter totalling $3 billion, including a $500 million deal with ENI, Italy's largest energy company, and a $300 million with the Australian Taxation Office.
Brown announced that that EDS will consolidate its various ecommerce services with the formation of E-Business Solutions, a new division whose activities will include installing supply chain management systems, building Web commerce sites and setting up online payment and billing systems.
The new division will report directly to Brown with a staff of 20,000. He said the company will examine its entire contract portfolio over the coming months and aims to increase operating margins to 10 per cent or more as quickly as possible.
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