MCI WorldCom and Electronic Data Systems may forge a joint venture to provide communications and computing services to large corporate customers, according to analysts and industry sources Tuesday.
The two companies also would provide services to each other, with MCI WorldCom (WCOM) handling voice and data communications services for EDS (EDS) and its customers. EDS, meanwhile, would manage MCI WorldCom's billing and information systems and may also purchase MCI WorldCom's information-technology unit, MCI Systemhouse, analysts and industry sources said.
The deal would mirror aspects of an agreement forged last week between AT&T (T), the No. 1 US long-distance company, and IBM (IBM), the world's largest computer-services company.
Under that deal, AT&T agreed to buy IBM's global communications network, and the two companies agreed to contract about US$9 billion in services to each other.
EDS, the world's second-largest provider of computer services, and MCI WorldCom, the United States' second-largest long-distance company, declined to comment.
The potential MCI WorldCom-EDS venture, first reported Tuesday by The Washington Post, would "be a very good partnership.... It will let them each concentrate on their core competencies," said Christine Heckart, an analyst with TeleChoice.
MCI WorldCom "is a telecommunications company, not an information-technology company, so it makes sense to exit that business," said Richard Klugman, a telecommunications analyst with Goldman Sachs.
Allowing EDS to handle MCI WorldCom's management-information-services business would allow the latter to focus on its main priorities of cutting costs and integrating the communications networks of the newly merged MCI Communications and WorldCom.
Jackson, Mississippi-based WorldCom bought MCI in September for $40 billion and has quickly moved to cut costs and shed noncore businesses. MCI WorldCom last month agreed to sell its satellite-television assets and last week cut about 2,000 employees, or nearly 3 percent of its workforce.
MCI WorldCom and EDS, located in Plano, Texas, have a historic connection since EDS once provided billing systems for LDDS, WorldCom's first corporate incarnation.
EDS was founded by former US presidential candidate Ross Perot and offers a range of back-office services for the telecommunications industry. Last week, it named a new chairman and chief executive to revive its falling profits and sluggish stock price.
Shares of EDS gained $1.69 to $44.875 on the New York Stock Exchange. MCI WorldCom added $1.19 to $63.375 on Nasdaq.
