But the plan is tackling the wrong problem at EDS and could backfire as the company pursues sales, said Bob Djurdjevic, president of consulting company Annex Research. He said EDS is already the low-cost provider among its competitors and that job cutting threatens morale and the company's overall skill level. "You don't get to choose who leaves," Djurdjevic said of the early-retirement program. "You may lose some valuable talent." An EDS representative said the company is taking steps to prevent problems related to losing older workers. EDS has succession plans in place across the organization and the retirement offer excludes certain employees, such as some government account workers with high security clearances. Employees in the AT Kearney consulting wing and most workers on the General Motors account also are ineligible. In addition, the retirements will be staggered through Sept. 30, 2005, "to ensure service quality is maintained," EDS said in a statement Tuesday.
One EDS employee said the early-retirement plan could hurt her work group's technical strength. The employee, who asked to remain anonymous, said she was not reassured by the company's plans for a smooth transition. "We can't lose anyone else on my team, and over half the team is eligible for this early retirement," the employee said in an e-mail.The retirement program is part of a broader effort to , which is second to IBM in IT services revenue. For 2003, EDS posted a loss of $1.7 billion, versus 2002 earnings of $460 million.
The company has struggled with troubled contracts, including a massive deal to upgrade theCEO . Earlier this year, EDS wrote down $559 million related to the Navy contract, which has incurred about $2 billion in operating losses since it began in 2000. The company said Monday that it would while it considers taking another charge related to the contract. EDS also has been the subject of a probe by the U.S. Securities and Exchange Commission. Mike Jordan, the former chief of CBS, early last year and has focused in part on boosting EDS' presence in . Last month, Jordan said the company planned to during the next two years--on top of some 5,000 employees released during the past year or so. EDS has 119,000 workers worldwide, with 53,000 in the United States. As part of its "Work Force Management Initiative" announcement Tuesday, EDS said it is "re-skilling" more than 20,000 programmers in technologies such as . At the same time, the company is looking to cut costs with the retirement program. It is open to most U.S. employees who will be at least 50 years old and fully vested in EDS' retirement plan by the end of 2004. The package includes contributions to the worker's pension plan and the accelerated vesting of stock options.
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EDS workers could also take the package and then pursue jobs with competitors like IBM and BearingPoint, whichDjurdjevic said EDS' main problem is leadership that doesn't know how to bring in sales. EDS' revenue last year was $21.5 billion, and it predicts revenue this year of $20 billion to $21 billion. According to Djurdjevic, cutting jobs at EDS can hurt the ability of sales teams to make strong cases. Combined with the company's growing use of workers in lower-wage nations, esprit de corps is likely to suffer, he suggested. "Any kind of downsizing, any kind of trimming, will cause discontent," he said. "Especially because some of the jobs being cut in the U.S. keep . ."