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EDS announces massive job cuts

Ed Frauenheim CNET News.com

Published: 13 Sep 2004 13:30 BST

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Electronic Data Systems plans to cut 15,000 to 20,000 jobs during the next two years, as the struggling technology services giant tries to slash costs and regain its footing.

EDS chief executive officer Michael Jordan provided that estimate of job cuts on Thursday, said company spokesman Kevin Lightfoot. "That number can be modified," Lightfoot said. It is "really dependent on how well we transform the business".

The firm has about 122,000 employees. It has already cut about 5,000 employees in the past year or so, Lightfoot said. The company is working to trim its annual costs by $3bn through steps including workforce cuts, office consolidation and reduced supply expenses.

EDS has been beset by challenges, including a recent downgrade by Moody's Investors Service of EDS debt to "junk" status, losses from a massive and troubled contract with the US Navy and an ongoing probe by the US Securities and Exchange Commission.

The probe covers topics including EDS stock-hedging efforts and the events leading up to its earnings warning for the third quarter of 2002. In addition, the SEC has requested documents related to the Navy contract.

EDS would have posted a net loss for the second quarter this year if not for the sale of a software division.

EDS ousted its former chief executive last year. The company brought in former CBS chief Jordan and has been focusing on its core services of application management, information technology outsourcing, and so-called business process outsourcing. Outsourcing refers to farming out tasks like data centre management.

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Software development for instance can be off shored with a perceived reduction in development costs but the resulting code is rarely of good quality and there is much greater expense in reworking and support over the life of software developed in this way. As a consultant who has to deal with off shoring on daily basis I very often see no savings at all over the lifetime of a software product, and in some cases actually see projects costing a fortune to rework.

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