EDS Planning Layoffs

The new job cuts come on the heels of a reduction of 5,000 in head count in the past year. Currently, the company has approximately 120,000 employees, so the workforce reduction could cut total head count by as much as one-sixth, or 16.67 percent.

The news comes hard on the heels of a long and rough summer for the Plano, Texas-based integrator. The late July release of second-quarter numbers revealed a pro forma loss of $16 million, or 3 cents per share, with sales up 4 percent to $5.24 billion. The release of those numbers came days after EDS slashed its dividend by two-thirds to conserve cash, and two weeks after credit-rating agency Moody's downgraded its senior unsecured notes to junk status.

EDS was understandably peeved when Moody's trimmed its rating on its senior unsecured notes from Baa3 to Ba1, which is below investment grade. It issued a statement that said, in part, "We have taken a series of aggressive steps to support our investment-grade rating. Given our progress and sound financial footing, we are in strong disagreement with Moody's decision. EDS has significantly reinforced its financial foundation, improved its competitiveness and fully expects to meet its guidance on second-quarter 2004 results."

But analysts are wondering whether the recent moves will scare away new clients. In addition, time will tell if a smaller EDS will cause it to experience a quality drop-off.

*This story courtesy of VARBusiness.com.