Embattled Electronic Data Systems Corp. has a new chairman and chief executive officer.
Dick Brown is being replaced as chairman and CEO by Michael H. Jordan, who retired as chairman and CEO of CBS Corp. in December 1998.
Brown's exit was mutually agreed upon by him and the EDS board of directors, EDS said in a statement issued Thursday afternoon. Brown was named EDS chairman and CEO in Dec. 1998.
Also coming out of retirement is Jeffrey Heller. He is the new EDS president and chief operating officer. Heller retired from EDS in February 2002 after 34 years with the company. He was EDS vice chairman at the time. He held the posts of president and COO previously at EDS between 1996 and 2000. The COO and president positions had been vacant since then.
Jordan and Heller are on the job already, an EDS spokesman said Thursday.
EDS, in Plano, Texas, is the world's second largest provider of IT services, behind IBM Corp.'s Global Services unit.
EDS has been struggling on several fronts for the past year or so. Its stock price has shrunk, its sales have been below expectations and it is being investigated by the U.S. government. Several financial analysts had blamed Brown for the problems and said he had lost credibility.
In Thursday's statement, EDS director Roger Enrico said Jordan and Heller have "the opportunity to move EDS forward unencumbered by past events."
Jordan also worked at PepsiCo Inc. for 18 years, serving in a variety of positions, including chief financial officer of PepsiCo Inc. and president and CEO of PepsiCo WorldWide Foods, which includes Frito-Lay Inc., EDS said in the statement.
Chief among EDS' problems is an ongoing investigation by the U.S. Securities and Exchange Commission (SEC), disclosed by the company in October. Back then, EDS said the SEC was looking at two issues, which themselves had brought much criticism upon Brown: a steep earnings and revenue shortfall EDS had announced several weeks earlier for its third and fourth fiscal quarters of 2002; and investment-banking bets EDS made on the value of its stock, which eventually backfired and cost the company about US$225 million to settle.
EDS blamed the earnings and revenue shortfall on a variety of issues including tough economic conditions globally, sagging new sales and lower growth on existing contracts due to a reduction in clients' discretionary spending, particularly in Europe. It also cited increased internal spending to bolster its sales team. But Brown took the brunt of the blame, as he came out looking out of touch with his company's performance due to the magnitude of the shortfall: EDS closed the 2002 third fiscal quarter with earnings of US$0.18 per share, versus the original expectation of US$0.74 per share. Revenue for that quarter came in at US$5.41 billion, versus the original forecast of between US$5.8 billion and US$5.9 billion.
Furthermore, the company announced plans to lay off between 3 percent and 4 percent of its workforce in October, or up to 5,520 employees out of the total of about 138,000 the company had back then.
EDS has also been affected by the bankruptcy of several big clients, including WorldCom Inc. and UAL Corp.
EDS' troubles are blamed for its loss of a multibillion dollar outsourcing contract that Procter & Gamble Co. was about to award it late last year. Just last month during its annual meeting with financial analysts, Brown had to open his remarks with the bad news that final negotiations between EDS and French company Alstom SA over a multibillion dollar outsourcing contract had collapsed, news that put a damper over the entire day and once again put Brown in a difficult position.
In February, EDS reported that earnings and revenue had fallen in its 2002 fourth fiscal quarter compared with the same quarter in fiscal 2001. EDS' (EDS) stock was in the US$50 range in mid-2002 but is now in the US$15 range. It closed at US$15.76 on the New York Stock Exchange Thursday.
In January, EDS replaced its chief financial officer, Jim Daley, with Robert H. Swan. Daley stayed on board as executive vice president for client sales, global solutions and marketing.