Electronic Data Systems and MCI WorldCom on Thursday announced a US$17 billion computer services deal involving a swap of assets and 13,000 employees.
Under the multifaceted deal, EDS will buy MCI WorldCom's Systemhouse information technology services unit for $1.65 billion and take on more than 12,000 MCI WorldCom employees. The companies will also exchange outsourcing agreements.
Separately on Thursday, MCI WorldCom (WCOM) reported better than expected fourth quarter earnings due to strong growth in voice and data revenues and benefits from recent acquisitions.
The company said quarterly earnings, excluding its investment in Brazilian long-distance carrier Embratel, were $428 million, or 23 cents a share, compared with earnings of $95 million, or 10 cents a share a year ago.
The results exceeded Wall Street's earnings expectations of 22 cents a share, according to First Call, which tracks analysts' estimates. Fourth-quarter revenues quadrupled to $8.0 billion from $2.0 billion a year ago.
In the deal with EDS, MCI WorldCom will outsource major portions of its computer applications development and maintenance services and virtually all of its infrastructure services to EDS in a 10-year agreement valued at between $5 billion and $7 billion.
Plano, Texas-based EDS (EDS), the world's second-largest computer services company, will outsource the bulk of its voice and data communications services to MCI WorldCom. That part of the deal is valued at $6 billion to $8.5 billion over the next 10 years.
With the acquisition of Ottawa-based Systemhouse, which had $1.7 billion in revenues in 1998, EDS will be one of the largest information technology services providers in Canada.
In addition, about 1,000 EDS network employees from offices around the world will be offered employment with MCI WorldCom.
This deal mirrors aspects of an agreement forged in December between AT&T Corp., the largest US long distance company, and International Business Machines, the world's largest computer services company.
In the AT&T-IBM deal, AT&T agreed to buy IBM's global communications network and the two companies agreed to contract services to each other worth about $9 billion.
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