Electronic Data Systems Corp. (EDS) - Growth As A Unit Of Gm

GROWTH AS A UNIT OF GM

After its takeover by General Motors, EDS moved into Europe, setting up operations in the United Kingdom. The following year, in 1985, sales grew threefold to $3.4 billion. The firm's workforce also nearly tripled, reaching roughly 40,000. However, earnings fell by 5.5 percent. International expansion continued with the creation of units in Australia, Brazil, Canada, France, Germany, Mexico, New Zealand, and Venezuela. GM paid Perot more than $700 million for his remaining shares of EDS stock and dismissed him from the board. Eventually, Perot established a competitor to EDS, known as Perot Systems. Meyerson resigned, and Lester M. Alberthal was named as his successor. As this management shakeup was taking place, EDS diversified into factory automation and the telecommunications industry with the goal of growing its client base and reducing its reliance on the GM contract, which accounted for the majority of the firm's revenues. EDS also made its first foray into Asia by establishing a unit in Japan that housed two information processing centers and catered to automobile manufacturers, electronics firms, and financial institutions.

EDS forged two major deals in 1987. The Beijing Municipal Government's Commission for Science and Technology hired the firm to create the Beijing International Information Processing Co. It also secured a contract from Nippon Information Industry Corp. of Japan to develop Nippon EDS to offer computer and telecommunications services. International growth efforts resulted in the creation of an information processing center in Paris. The Health and Benefits Strategic Business Unit of EDS agreed to supply data processing services to the National Account Service Co., which was a joint venture established by five U.S. Blue Cross and Blue Shield plans. In 1988, Fortune magazine named EDS as the leading diversified services company in the United States. Also, Alberthal was named one of the top 10 executives of companies with more than $1 billion in revenues. Acquisitions that year included M&SD Corp.; the $347 million purchase of Mtech Corp.; General Data Systems Ltd.; VideoStar Connection Inc.; and a 50-percent stake in China Management Systems Corp., the top information services provider in Taiwan. Sales grew to $5.5 billion, and operations had expanded to 27 countries.

In March of 1989, EDS completed work on its 153,000-square-foot Information Management Center, a communications home base for the more than 7,000 EDS clients across the globe and the headquarters facility for 21 information processing centers, six of which were overseas. Hitachi Corp. agreed to develop Hitachi Data Systems Corp., a joint venture with EDS which marketed computer hardware made by Hitachi. In June, EDS began merging EDSNET with the communications network of General Motors to create the world's largest proprietary digital telecommunications network. The project, which took three years and 2,000 employees to complete, cost more than $1 billion. Systems management contracts secured during the year included a 10-year deal between EDS Hong Kong and Hong Kong's biggest bank, and an agreement between EDS Australia and Australia's leading private food producer. The firm also purchased BancSystems Association Inc. and the electronic fund transfer operations of Automatic Data Processing Inc.

Employees reached roughly 61,000 in 1990. The Army, Navy, and Defense Logistics Agency awarded EDS a $712 million contract. Efforts to increase its presence in the travel and transportation industry paid off when EDS secured major contracts with National Car Rental System, Continental Airlines/System One CRS, and Hospitality Franchise Systems Inc. In 1991, Stratus Computer began working with EDS Personal Communications Corp. on developing a Home Location Register (HLR) system for the burgeoning cellular telephone industry. CAPSCO Software Canada Ltd. and EDS Canada began working together to target Canadian life insurance businesses. EDS also began providing data processing and communications network services to China's Ministry of Railways. The firm restructured operations around new Centers of Service, such as e-commerce, customer services technology, document processing, performance services, and technical products. Sales in 1992 grew to $8.5 billion, 40 percent of which were attributed to the GM account. GFI Informatique merged with EDS France to form one of the top information technology (IT) service providers in France.

Merger negotiations between EDS and long-distance telephone service provider Sprint Corp. dissolved in 1994. That year, EDS added to its international holdings with the purchase of French consultancy Eurosept and Brazilian consultancy F.C. Consultoria. In August of 1995, General Motors revealed its intent to spin off EDS as the largest independent computer services firm in the world. Valued at $25 billion, EDS was worth 10 times the amount General Motors had paid for it 11 before. In September, EDS bought A.T. Kearney for $628 million. When A.T. Kearney's 1,900 consultants had been integrated with the 1,600 consultants from EDS, the firm became one of the leading business consultancies in the world. In June of 1996, EDS stock was listed on the New York Stock Exchange after General Motors finalized its spin-off of the firm. EDS agreed to pay General Motors $500 million and provide computer services at a discount until 2006.