Financially troubled Electronic Data Systems (EDS) remains tight lipped over reports last week the company would shed more than 1000 jobs in Australia after the firm said it expected a massive shortfall in its earnings for its third fiscal quarter.

EDS is launching a company-wide cost-cutting initiative due to lower than expected revenue and profit results in the third fiscal quarter for 2002.

According to local reports last week this would involve around 1000 job cuts here.

A spokesman for EDS Australia, however, denied the claim, calling it "inaccurate".

"There is no directive or decision to do this company-wide or region-wide," he said. Instead, the Australian operation was considering a range of efficiency measures, said the spokesman, adding: "Nothing is off the table at this stage."

Meanwhile, the business units tipped to lose people have not yet been earmarked; however, "each business group will look at its operations" and decisions will be taken later, company officials told Computerworld last week.

The local spokesman added there was no change in EDS Australia's strategic focus, emphasising that it remained "aggressively" focused on large outsourcing accounts (some of which include Commonwealth Bank, Westpac and the Australian Taxation Office).

EDS blamed its expected revenue shortfall on a variety of things, including the weak economy, a drop in new sales, and lower growth on existing contracts due to a reduction in clients' discretionary spending.

The company will provide more details about its plan to cut costs and increase revenue and profits when it reports its third quarter results on October 30, a company official said. But in the meantime, an open letter to shareholders from EDS chief executive Richard Brown early this month indicates the steps being taken.

The letter states that, in addition to cutting overhead costs, EDS will: rein in expenses related to its sales operations, where overspending contributed to the third-quarter shortfall; try to generate revenue in the near term and improve its weakened cash flow by "cross-selling" additional services to existing clients; review its services portfolio "to ensure it provides maximum financial value"; and review under performing contracts to improve their bottom line, particularly in Europe.

Although the letter stresses that clients will not be affected by EDS' measures, Gartner cautions that IT managers and CIOs should be proactive and re-acquaint themselves soon with their companies' contracts with EDS.

"EDS will be going through every single contract it has to see if it's performing well, and if it's not, they'll look to make improvements," said Lorrie Scardino, a Gartner analyst.

The key for CIOs and IT managers is to know in detail where EDS is over performing and under performing in the contract, so that they will be ready to determine whether EDS' proposals regarding the contract and service levels are reasonable or not, she said.