EDS, MCI WorldCom in US$17B Asset Swap

Electronic Data Systems Corp. (EDS) and MCI WorldCom Inc. today confirmed reports that they are entering into a complex deal valued at US$17 billion [B] that will shift assets, including service contracts and more than 13,000 staff, between the two companies.

The aim of the deal is to enable both companies to better position themselves in the electronic business and global communications services arenas, EDS and MCI WorldCom said in a joint statement issued today.

The complex deal contains four main pieces:

* MCI WorldCom will outsource much of its IT services to EDS including the bulk of all applications development, maintenance agreements and infrastructure services. According to the joint release, this outsourcing arrangement is the largest ever such deal in the telecoms sector, valued at between $5 billion [B] to $7 billion [B] over its 10-year span.

* EDS will outsource most of its global network to MCI WorldCom with the communications company becoming responsible for the management of voice and data communications services for both EDS and its customers. MCI WorldCom is expected to profit by the deal to the tune of between $6 billion [B] and $8.5 billion [B] over the coming decade.

* EDS will purchase MCI WorldCom's IT services arm, MCI Systemhouse, for $1.65 billion [B] in cash. Systemhouse reported $1.7 billion [B] in revenues last year and will be integrated into EDS' existing infrastructure, according to the release. Systemhouse currently has 120 offices worldwide, employing around 9,000 staff.

* MCI WorldCom and EDS will work together on developing network service offerings aimed at business and governments users worldwide.

The deal will involve over 12,000 MCI WorldCom and Systemhouse staff, mostly in the U.S. and Canada, joining EDS, while around 1,000 EDS employees from the company's networking operations worldwide will be asked to join MCI WorldCom, the release said.

Rumors of a tie-up between the two companies begun to circulate in December when the duo were reportedly in talks to set up a joint venture.

Around the time of those rumors, MCI WorldCom announced that it would lay off around 2,000 of its U.S. workers as of Dec. 31. The staff cuts largely targeted the company's network operations where duplications existed following the US$40 billion [B] acquisition of MCI Communications Inc. by WorldCom Inc., which closed in September.

MCI WorldCom, in Jackson, Mississippi, can be reached at +1-601-360-8600 or via the Internet at http://www.mciworldcom.com/. EDS, based in Plano, Texas, can be reached at +1-972-604-6000 or via the Internet at http://www.eds.com/.

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