EDS pulls out of P&G outsourcing mega-deal

2 July 2002 Services giant EDS has withdrawn from a record-breaking outsourcing deal with Procter &Gamble that would have seen it take control of more than four-fifths of the consumer products giant’s IT department.

The deal, worth an estimated $1 billion (€1.1bn) a year, was only clinched last month.

EDS cited increased concerns about the risks it was exposing itself to with such mega-deals as the reason for backing away from the deal. Investors and analysts that have also questioned the way that the company accounts for such transactions.

“The decision to terminate discussions was made after careful consideration of the overall transaction requirements and more specifically, the acquisition price sought by P&G for intangibles associated with the related business assets,” said EDS in a statement.

EDS’ decision to pull-out at the eleventh hour follows the release of details about its exposure to telecoms giant WorldCom, which is threatened with collapse following the revelation of a $3.8 billion (€3.9bn) fraud.

EDS admitted that it will book $150 million (€152.9m) in revenues from an ongoing WorldCom outsourcing deal in the period to the end of June, for which it has not yet been paid. $60 million (€61.2m) of that total has not even been billed for yet.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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