8

P> Total Contracts $554,427,000

http://www.eds.com/

It was a marriage they said wouldn't last. And after 10 years, the union between General Motors Corp., Detroit, and Electronic Data Systems Corp. began to unravel last August.

GM announced plans to spin off EDS into an independent public company -- a strategic move predicted by WT five months earlier. The spin-off didn't surprise industry insiders. After all, the marriage was one of convenience in the first place.

The automaker leaned on EDS to integrate GM's dispersed facilities and suppliers through an advanced computing and telecommunications network. EDS expanded its customer base beyond the United States, using GM's global reach as the entree into foreign markets.

In some ways, the split is just as opportunistic as the marriage. Realizing both had gotten what they wanted out of the relationship, they decided to part ways.

"Our affiliation with GM has been a positive one for both companies," said Les Alberthal, EDS chairman. "But as EDS increasingly seeks to move into new markets, forge new alliances and offer a widening array of capabilities, it becomes more advantageous to possess the flexibility we can have as a stand-alone company," he explained.

The crucial impact information technology has on business performance, customer service and an organization's bottom line is how Alberthal explained the company's record earnings and $12 billion in revenues last year.

Bolstered by the best fourth quarter in the company's 33-year history, and new contract awards of more than $10 billion, the company posted $12.42 billion in operating revenues in 1995, a 25 percent increase from $9.96 billion in 1994. Net income rose 14 percent from $822 million in 1994 to $939 million in 1995. Fourth quarter operating revenues increased 24 percent, or $711 million, to $3.7 billion.

Despite the military reduction, defense contracting continues to be part of the EDS empire. The Army Information Systems Selection and Acquisition Agency awarded EDS a contract to provide software communications services, analog and digital systems design and analysis, software development, testing, maintenance and installation.

EDS also stole a lucrative follow-on networking contract from Digital Equipment Corp. The Navy gave EDS the $332 million PC LAN award to provide local area and enterprise network products and services. The company supplies federal agencies with servers, office automation software, peripherals and networking communications equipment.

Another major coup for EDS was getting a piece of a $929 million, five-year Air Force contract to support intelligence agencies. Ironically, the mammoth company is taking a back seat to BTG Inc., a $156 million integrator and reseller in Vienna, Va. As a subcontractor to BTG, EDS will focus on the procurement and testing of hardware and software.

The company's non-defense contracts include one to support the Education Department's Student Loan Program and another to provide information technology commodities to the National Institutes of Health.

In the area of outsourcing, a strong business base for EDS, the company won two large outsourcing agreements.

EDS will focus on a wide range of business-transformation initiatives in a strategic partnership with Rolls Royce Aerospace Group. The contract is expected to generate revenues of more than $900 million during the next decade. Down under, EDS will provide IT services to more than 140 agencies of the South Australian government, marking the first time a government has outsourced its entire IT infrastructure to a private-sector enterprise.

The Texas company also signed the largest financial services contract in South America with DataNet, an electronic banking network to be formed in Argentina by the merger of two competing banking networks, DataCash and NewNEt.

In the health-care market, which EDS entered in the early 1960s, EDS negotiated a six-year agreement with Blue Shield of California to help develop new health maintenance organization systems. Its extensive experience providing medical claims processing to Blue Cross/Blue Shield plans has translated into Defense Department work such as tracking health benefits eligibility.

EDS also signed an agreement with PhyCor, one of the nation's largest management service organizations for medical clinics, to transition clinics to an automated environment using EDS' computer-based patient record technology.

Aggressive expansion plans call for EDS to become more than just a technology provider. Though many investment analysts question the wisdom of EDS becoming a player in the consulting business -- usually the domain of the Big Six accounting firms -- EDS last year acquired A.T. Kearney, the global management consulting firm.

FINANCIAL HIGHLIGHTS

(Year ending 12/31)

19951994 0ncrease

Systems and Other Revenues $12.4B$10B24.7

Net Income$938.9M$821.9M14.2

Earnings Per Share$1.96$1.7114.6

(4th Quarter ending 12/31)

19951994 0ncrease

Systems and Other Revenues$3.6B$2.9B24.4

Net Income$269.5M$236.5M14

Earnings Per Share$0.56$0.4914.3