EDS starts chasing smaller business for faster return

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Computer-services giant Electronic Data Systems (EDS) is to focus on smaller deals which bring a quicker payoff as the large scale IT projects of the 1990s continue to fade away.

In an effort to boost short-term revenue and cash flow, the company will increase incentives for sales personnel who sign contracts that bring in cash during 2003. Large deals have been blamed for not delivering quick enough return for the company, with contracts with the US Navy and Marine Corps and another deal with the UK social-services agency cited as particular drains.

Chief sales officer Stephen M. Smith said that more of the sales force would be shifted to pursuing small and medium-sized deals over the next year to 18 months and that instead of competing for at least 90 deals worth more than $250 million in gross revenue a piece, EDS would pursue 30 to 50 of them.

"We're not stepping away from megadeals," he said. "We're becoming more selective and more precise on how we screen and prioritize large deals with an eye toward free cash flow, capital costs and the financial condition of our prospects."

EDS shares have fallen by half since the company announced in September that third-quarter earnings would fall far short of expectations because of a downturn in corporate discretionary spending on technology. The Securities and Exchange Commission is looking into events leading to the earnings warning and financial transactions. The company also plans to cut up to 4 per cent of its work force, about 5,500 jobs.

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