EDS: Brown's firing won't rattle government business

The sudden departure of Richard Brown, chairman and chief executive of EDS, should not have any impact on the company's government unit, a company spokeswoman says.

Apparently in the works for sometime, EDS ousted Brown and announced Thursday that former CBS chairman and CEO Michael Jordan would replace him. Jordan takes over March 24.

"The EDS board of directors and Dick Brown mutually agreed it is in the best interests of the company to effect a leadership change at this time," said Roger Enrico, a director of the Plano, Texas, company.

The board believes the new management team of Jordan and Jeffrey Heller, named president and chief operating officer, will allow EDS to move forward unencumbered by past events, Enrico said. Heller is a former EDS executive, who retired last year.

EDS' stock has plummeted in the past year from $63.26 on March 20, 2002, to $15.76 on Thursday. The announcement was made after the markets closed on Thursday. EDS shares closed Friday at $17.63, up nearly 12 percent.

David Garrity, managing director at American Technology Research Inc., a boutique research firm in Old Greenwich, Conn., said he didn't believe the change will have any impact on EDS' government unit.

"If anything, I think they will redouble their focus [on government business], to improve their win rate," Garrity said. "I know NMCI in the past has posed challenges, and by no means will it be a ramp-up or rollout without its own challenges, but indications on growth of that business are fairly good."

Congressional support for NMCI has been growing, he said, with appropriations for fiscal year 2004 likely to be up "significantly."

The company has been battered by a Securities and Exchange Commission investigation into its accounting practices, serious problems among its customer base of large companies such as WorldCom Inc., US Airways and United Airlines.

EDS also has had difficulties with the large outsourcing projects such as the Navy Marine Corps Intranet contract, an $8.8 billion program to take over seat management, application management and networking for 300,000 or more sailors and Marines. Under the service level agreements included in NMCI, EDS was required to invest up front in manpower and equipment before the project generate a return.

Brown joined EDS in December 1998, with much fanfare after a successful stint at Cable & Wireless Communications plc of London.

Jordan retired from CBS Corp., formerly Westinghouse Electric Corp., in December 1998. Before joining Westinghouse, Jordan was a partner with Clayton, Dubilier and Rice, a private equity firm in New York. Previously, he spent 18 years with PepsiCo Inc. where he served in numerous senior executive positions, including chief financial officer and president and CEO of PepsiCo WorldWide Foods, which includes Frito-Lay. From 1964 to 1974, he was a consultant and principal with McKinsey & Company.

Heller retired from EDS in February 2002, after 34 years with the company, most recently in the position of vice chairman. Heller returns as president and chief operating officer, a role in which he served from 1996 to 2000. Heller joined EDS in 1968 as a systems engineering trainee.

(Updated March 21, 2003 2:21 p.m.)

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