IBM wins new IT services contract
Published: 24 Mar 2003 10:59 GMT
In a deal that steals business from rival Electronic Data Systems, IBM has announced a 10-year, $150m contract to provide information technology services to credit card processor Certegy.
The contract calls for IBM to consolidate, automate and manage a large portion of Certegy's mainframe operating systems and hardware operations in the United States. Using IBM's "on demand" services model, Certegy will pay IBM according to the volume of services it consumes. IBM already provides IT services for Certegy's UK and Australian operations.
For the contract, announced on Friday, Certegy decided to switch to IBM from EDS. Certegy said it will record a pretax provision of up to $10m in the first quarter for early exit costs associated with severing the current EDS agreement.
Certegy said the IBM agreement can provide it significant cost savings and future operational flexibility. The company said it expects the conversion to IBM to be completed by the end of the third quarter, and to add three cents per share to annual earnings beginning in 2004.
EDS has experienced a string of troubles over the past several months, including a dramatic earnings warning in September, a formal SEC probe into the earnings warning and stock-hedging activity, and the revelation that the company has invested $430m in a troubled contract. On Thursday, EDS announced a top management shake-up, with Dick Brown stepping down as chairman and chief executive and former CBS chief executive Michael Jordan taking the reins of the company.
Certegy also provides debit card processing as well as cheque risk management and cheque cashing services.
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