PLANO, Texas - Electronic Data Systems Corp. won a five-year, $1.3 billion contract from ABN Amro Holding NV yesterday to manage computer networks for the biggest Dutch bank's corporate- and investment-banking division.
The agreement concludes more than four months of talks and comes 12 days after Electronic Data, the world's second-biggest computer-services company, announced a 10-year, $4.5 billion order from Bank of America Corp.
The new contracts eased concern among some investors that Electronic Data might be unable to compete for big orders, which can require multimillion-dollar, up-front investments. The issue arose after demand fell this year and the company slashed a 2002 cash-flow forecast as much as 78 percent. The ABN Amro accord lifts new orders and renewals to $6 billion this month, the company said.
"It's a well-managed company that is getting its act together," Forrest Mervine, who helps manage $1.2 billion at Philadelphia Corp., said about Electronic Data. His firm owns about 17,000 shares of the Plano, Texas-based company.
Electronic Data shares rose 28 cents to $18.48 at 1 p.m. in New York Stock Exchange composite trading. They had dropped 73 percent this year and set a 16-year low in September. Stock markets closed early for today's Christmas holiday.
ABN Amro fell 5 cents to 15.53 euros in Amsterdam.
Electronic Data lost bids recently on some big contracts, including a multibillion-dollar order from J.P. Morgan Chase & Co. and a $600 million project from the state of Texas. Procter & Gamble Co. ended talks with the company on a multibillion-dollar order, choosing to divide it into smaller contracts.
On Sept. 18, Electronic Data said free cash flow, or cash from operating activities minus capital expenditures, will be as low as $200 million after it forecast as much as $900 million. It set aside $100 million in the second quarter to cover payments it no longer expects from telecommunications company WorldCom Inc., which in July filed the biggest U.S. bankruptcy ever.
Electronic Data spokesman Terry Balluck declined to give financial terms of the contract with Amsterdam-based ABN Amro, which plans to disclose them when it issues fourth-quarter results Feb. 15.
"There's not a lot wrong" with Electronic Data, Mervine said. "Much of what is out there is perception." He said he thinks that Electronic Data's share price will double and is buying the shares occasionally.
Financial-services contracts employ 10,000 Electronic Data workers in 29 countries and formed 17 percent of sales last year, the company has said. Other financial customers include Royal Bank of Scotland Group PLC, Deutsche Bank AG and Abbey National PLC.
The ABN Amro contract includes computer-management services at the London-based division, to tie together operations in seven countries and its business in 50, Balluck said.
ABN Amro management board member Hugh Scott-Barrett had said in August that about 1,000 workers in the Netherlands, the United Kingdom, the United States, Germany, Singapore and Hong Kong may transfer to Electronic Data under the contract. The bank said later that as many as 1,000 more temporary workers also may go.
Balluck declined to say yesterday how many bank workers will transfer to Electronic Data.
ABN Amro has announced more than 4,000 job cuts in the past two years to try to revive earnings at its corporate and investment bank, which had losses in the first three quarters. The bank plans to merge back offices and streamline its information- technology and operations units to reduce costs by about 450 million euros ($462 million) by 2004.
Regulatory approval of the Electronic Data contract and advice from worker representatives are pending. Some details need to be settled, ABN Amro spokesman Steven Blaney said.