EDS, Sybase team up for enterprise services

Electronic Data Systems links arms with the e-commerce software giant to offer joint customers consulting and integration services and Sybase's enterprise-portal software.

3 min read
Electronic Data Systems on Monday linked arms with e-commerce software giant Sybase to provide joint customers with consulting and integration services coupled with Sybase's enterprise-portal software.

Under the new pact, Emeryville, Calif.-based Sybase and Plano, Texas-based EDS plan to help large companies implement and integrate their existing application systems with the Sybase Enterprise Portal--software that enables companies to conduct business with their trading partners, customers and suppliers over the Web and to access the portal through mobile devices. Both companies said they intend to target businesses across all industries, including automotive, consumer products, retail and financial services.

The Sybase alliance is the latest in a string of new contract wins and partnership announcements for EDS, fueling the company's momentum over the last few weeks.

Just last week, EDS trumpeted a five-year services contract worth $300 million to help Australian telecommunications giant Telstra with software development and maintenance. That's one of several new computer outsourcing contracts EDS has won over the last few weeks, most of them long-term deals with multimillion dollar price tags.

Following a recent meeting with Wall Street analysts at which EDS boasted of its recent contract wins and rosy outlook, several financial analysts issued positive reports, rewarding the old-line consulting firm with healthy projections.

In recent research notes, Deutsche Banc Alex Brown analyst Mark D'Annolfo initiated a "buy" rating on EDS' stock and set a 12-month price target of $72 per share. D'Annolfo noted that EDS faces a positive road ahead, paved by its renewed momentum, strong core outsourcing skills and potential market resurgence.

Bill Loomis, an analyst at Legg Mason, said that while many technology businesses are stumbling in a difficult market, EDS has regained footing because of its specialty in helping larger clients with more traditional and complex systems integration and computer outsourcing services.

"If you look at the companies in the IT services space, those that focus on longer term contracts--the outsourcing business--are the ones doing well right now," said Loomis, who rates EDS shares with a "buy." "The market is favoring companies (that are winning) longer term contracts, which also offer better visibility of the business."

Shares of EDS have been edging higher, climbing 15 percent so far this year. The company, which has hit a 52-week low of $38.37, is gradually closing in on its 52-week high of $75 per share. Other rivals in the consulting and services sector--especially Internet consultancies Scient, iXL Enterprises and Viant--haven't been doing so well and suffer from overall economic woes, cost-cutting plans, layoffs and languishing shares.

Last quarter, EDS exceeded profit expectations, driven largely by new contract signings from businesses and government agencies. For the fourth quarter, EDS said it nabbed contracts totaling $15.8 billion, up 41 percent from $11.2 billion in the comparable period in 1999. For fiscal year 2000, the total value of its contract signings increased 31 percent to $32.6 billion from $24.9 billion in 1999.

EDS in October won a multiyear government services contract roughly valued at $6.9 billion, beating out rivals Computer Sciences, IBM Global Services and defense contractor General Dynamics. The deal, which is considered the largest government outsourcing contract ever awarded, calls for EDS to help develop and upgrade the Navy-Marines Corps' intranet.