EDS offers retirement to 12,000
posted in Outsourcing News and Top Outsourcing deals |Source:www.star-telegram.com
Technology outsourcing giant Electronic Data Systems Corp. said Wednesday that it has offered early-retirement packages to about 12,000 U.S. employees, or about 9 percent of its work force worldwide.
The move comes after the Plano-based company cut about 5,000 jobs worldwide and doubled its offshore employment last year in an attempt to lower its labor costs.
EDS said it made the early-retirement offer to employees Tuesday. Eligible workers have until Oct. 30 to participate, according to a document the company filed Wednesday with the Securities and Exchange Commission.
Under the early-retirement program, EDS is offering employees an “enhanced benefit” equal to five times the annual credits made to the company’s retirement plan, excluding interest, plus an additional $10,000 from the plan, Jacobsen said. Eligible employees must be at least 50 years old and have worked for EDS for at least five years, he said.
“It’s part of EDS’ ongoing plan to improve our cost structure and competitiveness,” Travis Jacobsen, a spokesman for the company, said Wednesday. “It’s intended to be entirely voluntary.”
Of EDS’ 136,000 employees worldwide, about 8,200 employees are in North Texas, including about 1,000 in Fort Worth.
Industry observers say EDS must cut expenses to better compete in an industry where labor and technology costs have fallen significantly in the past several years.
“This is just another stage — and a very predictable stage — in the evolution of EDS,” said Todd Furniss, chief operating officer of the Everest Group, a Dallas-based outsourcing consulting firm. “This is largely a nonissue.”
Shareholders apparently agree, even though EDS said it expects to take an estimated charge of $70 million to $130 million in the fourth quarter in added costs for retirement benefits. EDS shares (ticker: EDS) on Tuesday closed at $21.89, down 49 cents. The stock is off about 27 percent from a high of $29.95 in late April.
EDS started in 1962 to help run other companies’ computer systems. As that business matured and growth slowed, EDS has shifted its focus to new outsourcing opportunities, such as computer applications and business processes, such as payroll and accounting.
The company has had some rough patches along the way, losing $1.7 billion in 2003.
Revenue and profits were up in the second quarter of this year, but the outlook was less rosy. Signed contracts, which are an indicator of future revenue, fell to $4.3 billion in the second quarter from $5.4 billion a year earlier.
“EDS was in the red. Now, they’re in the black, but they’re still underperforming against much smaller firms,” said Paul Roehrig, an analyst for Forrester Research in Cambridge, Mass. So, EDS Chief Executive Ronald Rittenmeyer is continuing to expand the company’s offshore outsourcing to low-cost countries such as India, China and Brazil. EDS’ offshore employment hit 38,000 at the end of June, up from 14,000 at the end of 2005. The company expects to have 45,000 offshore employees by the end of 2008, Jacobsen said.
Offshore expansion has boosted EDS’s worldwide employment to 136,000 people in 64 countries from 119,000 at the end of 2005. In comparison, its U.S. employment stands at 50,000, excluding the early retirements, compared with 51,000 at the end of 2005.
