PLANO, Texas (AP) - Eight months into his tenure as CEO of Electronic Data
Systems Corp., Ronald Rittenmeyer is overseeing the sale of the company,
something he says he never planned.
"It just came together," Rittenmeyer said Tuesday during an interview.
The sale to Hewlett-Packard Co. is a milestone for a company that was
started on a shoestring in 1962 by H. Ross Perot, who quit a sales job at IBM to
work for himself. The company has remained independent for all but a few years
when it was owned by General Motors Corp.
EDS will stay in Plano and keep "EDS" in its name, officials said. It even
plans to continue sponsoring the annual EDS Byron Nelson pro golf tournament.
The company, which runs call centers and computer systems for big companies
and government agencies, has a larger technology-services business than HP. Mark
Hurd, HP's CEO, said EDS is "more mature" in that regard and has capabilities
that HP's services unit lacks.
The impact of the deal on EDS' 137,000 employees is uncertain. Rod
Bourgeois, an analyst with Sanford C. Bernstein & Co., said he expects some EDS
jobs to disappear as the companies combine work forces.
In a conference call with analysts Tuesday, Hurd, in California, and
Rittenmeyer, who was in New York, repeatedly used the word "synergies" to
describe the benefits the combined company would see as it cuts overlapping
costs.
"In terms of job cuts, we are continuing to streamline our work force at
EDS," Rittenmeyer said during the conference call. "We've been doing that for
some time ... there are always job adjustments."
In an interview with The Associated Press, Rittenmeyer said, "Employees who
do a good job, who are good performers, don't have to worry about anything."
The CEO said the company is constantly evaluating employees and shedding
underperformers.
"All this does is provide a catalyst for us to look perhaps a little deeper,
a little wider," he said in the interview.
EDS practically invented the industry that came to be known as
information-technology outsourcing. Perot, who went on to run for U.S. president
in 1992 and 1996, hired many military veterans who generally came to work in
white shirts, ties and short hair cuts.
Perot sold EDS to GM in 1984 for $2.5 billion. GM later bought out Perot's
remaining shares for another $700 million, but it spun off EDS in 1996 for $500
million.
By then, it had been surpassed by IBM in technology-services revenue.
Rittenmeyer's predecessors Michael H. Jordan and Dick Brown each cut
thousands of jobs and moved thousands more to low-cost countries, especially
India. EDS now has 45,000 workers in what it calls "best-shore" locations, and
plans to increase that number.
EDS has been the subject of takeover speculation for years. Deutsche Telekom
AG was reported to be looking at it last year. Earlier rumors centered on Dell
Inc. Neither company ever confirmed the reports.
Shareholders will vote on the HP deal. Rittenmeyer declined to say whether
there were other offers.
"There are no obvious competing bids that may emerge," said David Grossman,
an analyst with Thomas Weisel Partners, citing the $25 per share that HP will
pay, which is about 30 percent higher than EDS shares traded Monday before news
of the deal leaked.
The shares topped $70 in 2000 and 2001, but they haven't been at $25 since
last July. Analysts said the EDS board might have decided a sale was the
quickest way to get the price up.
"The board had a whole series of deliberations and conversations," beyond
the challenge EDS faced lifting the stock price on its own, Rittenmeyer said in
the interview. "I'm comfortable that our board made a decision with shareholders
in mind first."
After Brown arrived in 1999, the company won many huge contracts and earned
more than $1 billion a year from 2000 through 2002. But it lost $1.7 billion in
2003 due partly to a money-draining contract with the Navy, the stock plunged
and the company faced shareholder lawsuits and a Securities and Exchange
Commission investigation into its accounting practices.
Jordan, a retired Westinghouse CEO, was brought in to fix the problem
contracts and cut costs. After two years of small profits, earnings grew in 2006
and 2007, and new work was coming in. Jordan stepped down in September, and
Rittenmeyer was promoted from chief operating officer.
Civic leaders in Plano, where EDS moved from neighboring Dallas in 1993, are
worried about the uncertainty surrounding a major taxpayer and supporter of its
symphony and other nonprofits.
"The concern we'd have locally is the potential impact on the housing market
with a loss of jobs," said Jamie Schell, the incoming chairman of the local
chamber of commerce. "But maybe the result will be a more stable company."
For now, "it appears to be a great deal for the shareholders," said another
chamber director, Jim Boswell, "and I'm sure many EDS employees living in Plano
own EDS stock."
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