EDS gets green light for more NMCI seats

EDS has the gotten the go ahead to roll out another 150,000 seats under the Navy Marine Corps Intranet contract, the company announced this week.

The latest clearance by the Defense Department pushes the total authorization to 310,000 seats.

So far, EDS and its team have moved about 60,000 seats to the NMCI environment. The increase in the number authorized seats follows EDS demonstrating that it could meet the service level agreements set in the eight-year, $6.9 billion contract.

"The results from four months of testing clearly demonstrated that the NMCI is ready to move to the next level," said Rear Admiral Charles Munns, the director of the NMCI program. "These authorizations mark major milestones in the progress of the NMCI program. We are pleased with the decisions and will move forward with additional deployment."

Until the recent authorization, Congress and the Defense Department had limited the initial NMCI deployment to no more than 160,000 seat orders.

The 310,000 seats authorized is not the full number for NMCI, according to EDS spokesman Kevin Clarke. Estimates for the full deployment of NMCI range from 360,000 to 410,000 seats, he said. A decision to authorize the remaining seats is likely to be made this summer, after 85 percent of the network is in place and subjected to additional testing.

Financial analysts have been waiting for signs that EDS will eventually begin to make a return on NMCI. The contract is structured in such a way that EDS bears all the up-front costs of establishing the network, and does not begin to recoup its investment until the bulk of the seats are installed and the company meets pre-determined performance levels.

Cynthia Houlton, senior analyst with RBC Capital Markets in New York, said in a report released today that her firm remains "cautious about potential for further delays" in the NMCI rollout.

"We do have the concern that going to war in Iraq could delay deployment," Houlton said. "[T]here are a lot of bodies that aren't sitting where they're normally sitting, and you can't change out their desktops ? EDS can't be paid for something they're not doing."

Houlton said that another concern is if seat deployment is delayed, Congress could cut funding for NMCI if the Navy doesn't spend the funds approved to date.

"We feel like there are things beyond EDS' control," she said.

EDS also announced that Vincent Madsen, a 24-year EDS veteran and former president of EDS' Asia-Pacific delivery organization, has been named client delivery executive for the project. Madsen will assume responsibility for the central NMCI infrastructure and the delivery and deployment of products and services at Navy and Marine Corps bases worldwide.