Certegy dumps EDS, signs 10-year deal with IBM

Credit and debit processing company Certegy has signed a 10-year, US$150 million contract with IBM to provide on-demand IT services for its U.S. operations. IBM currently provides IT services to Certegy's operations in the United Kingdom and Australia.

The agreement replaces a 10-year deal that Certegy already had with beleaguered Electronic Data Systems. That contract would have expired in 2009, according to Certegy spokeswoman Mary Waggoner, who declined to comment on the financial terms of that agreement.

In order to deep-six the EDS contract, Certegy was willing to take a $10 million pretax charge in the first quarter of 2003. But EDS spokesman Ken Smalling downplayed the significance of the IBM deal, saying it was not a win for that company. He said it was just a case of sour grapes for Certegy.

"This is not a contract win for IBM over EDS," Smalling said. "We signed a deal with one of Certegy's competitors and they didn't like that so they canceled their contract with us."

Waggoner, however, said the new deal stemmed from Certegy's successful relationship with IBM in the U.K. and Australia. She said the move to IBM, expected to be in place by the end of the third quarter of 2003, would help Certegy improve operations by standardizing its IT operations worldwide. "We expect this will add 3 cents per share to our annual earnings beginning in 2004," she said.

Eric Ray, IBM's vice president for financial services at IBM Global Services, said the Certegy deal, coming in the wake of deals with American Express and Deutsche Bank, will help solidify the company's place in the financial services industry.

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