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10 February 2004 Troubled IT services giant EDS has said that it has received a number of offers for its UGS-PLM product lifecycle management software subsidiary that could raise up to $2 billion.

The unit has been on the block since EDS revealed at the beginning of 2003 that a number of big outsourcing contracts were unprofitable. EDS's troubles deepened in the summer when it revealed that its $6.9 billion US Navy contract had run into trouble.

And in December, it unexpectedly lost the renewal of its £3 billion (€4.4bn) Inland Revenue outsourcing contract, one of the biggest in the UK.

EDS had been planning a public stock offering for its UGS-PLM unit, but a trade sale would enable it to raise more money, more quickly. The company is hoping to sell the company for at least two times its 2003 revenues of $894 million — or $1.8 billion.

The announcement by EDS was made on the same day that a UBS Investment Research analyst suggested that the company risks seeing its corporate debt rating downgraded to "junk" status by credit reference agency Moody's Investment Services.

All three major credit reference agencies have put the company on "credit watch", making a downgrade a distinct possibility should EDS be hit with further bad news.

A downgrade would affect EDS's core IT outsourcing business, said UBS IT services analyst Adam Frisch. "It might be hard for a CIO to go to the board and say we want to enter into a long-term relationship with a vendor that is in junk status," said Frisch.

However, EDS has insisted that its cash position remains strong and that it expects to generate between $500 million and $600 million in cash during 2004. EDS is currently in talks with Moodys about its credit rating, added a spokesman.

The sale of the UGS-PLM unit would help bolster the company's cash reserves and make a downgrade less likely.