Wednesday, 5 December 2007

EDS - The Revival - Chapter Two

Although widely trailed, it was announced last night that Ron Rittenmeyer was to take over as Chairman and CEO of EDS from Mike Jordan who becomes “Chairman Emeritus” and will step down from the board on 31st Dec 07.

Jordan has turned 71 so probably deserves more time to practice his golf and write more books. Rittenmeyer is no spring chicken either – having just turned 60. So there is hope for me yet!

When Jordan took the EDS helm in March 2003, it was a company in serious crisis. The US Navy contract was haemorrhaging $1billion a year. In the UK, EDS thought they would never win another UK Govt contract – having just lost their prestigious Inland Revenue contract to Capgemini. Morale was at rock bottom and you got a sense of open internal warfare. This all contributed to old customers jumping ship and new ones staying well away.

EDS is undoubtedly a rather different company now. Indeed, not only have the US Navy problems been fixed but a new contract awarded.

But the “Mission Accomplished” sign can hardly be nailed to the front of EDS’ Dallas HQ. Jordan had a $30 share price target when he took over (it was $15 then). EDS still languishes at <$20. Results announced on 1st Aug 07 showed orders down 20% in the quarter. EDS faces a quite different world even than in 2003. The Indians are now very serious competitors for the very type of IT infrastructure work that is EDS bread and butter. The outlook for the economies in its main US and European markets look problematic – and now that includes the Public sector outlook too.

Let’s credit Jordan with reasonable marks for “EDS – The Revival” Chapter One. Rittenmeyer still has much work to do in Chapter Two.

No comments: