Richard Brown will replace Les Alberthal on January 15, 1999 to become the chairman and chief executive of services giant Electronic Data Systems (EDS). Brown, 51, will be only the third chairman and CEO in EDS’s 36-year history. He will join EDS from Cable & Wireless Plc . Brown has been chief executive of C&W since July 1996 (CI No 2,914). Brown was previously president and chief executive of H&R Block Inc, and before that vice-chairman of Ameritech Inc, having run the Illinois Bell subsidiary until 1993. He has more than 25 years of experience in telecommunications, and is a communications science graduate from Ohio University. The reasons for leaving C&W are, according to Brown, the exceptional opportunity at EDS, the attractive financial package, personal and family reasons. Brown was seen as a candidate to replace Robert Allen as CEO at AT&T when it came up in 1997 (CI No 3,246). According to the Financial Times this possibility caused C&W to increase the value of his compensation package. According to a C&W’s spokesperson the position this time was that Brown wanted to go and negotiations started from there. Brown’s strategic vision will be crucial if EDS is to maintain its challenge on IBM as the number one services company. Brown has said that, the direction EDS takes over the coming months will shape its future for the next decade. Market analysts at Credit Suisse First Boston say that EDS faces issues to do with its relatively low margins on its outsourcing contracts and its bid strategy. Wall Street’s reception of Brown is a factor in EDS’s future share performance, according to Bob Djurdjevic, analyst at Annex Research. Initial market reactions have been positive, merchant bank BT Alex Brown has upgraded EDS to buy from market performance and both Salomon Smith Barney and Lehman Brothers has upgraded to outperform from neutral. EDS’s current share price is up 4% at $42.50. This is down, however, from its five year high of $60 in the third quarter of 1996. Brown is seen by many as an excellent deal-maker. He has negotiated 21 deals valued at more than $20bn during his time at C&W. He sold off businesses where C&W did not have majority ownership and moved into the key US market by buying MCI/Worldcom’s entire internet backbone. Questions have been raised, however, that Brown is a deal-maker rather than a business-maker. C&W sold a 5.5% stake in Kong Kong Telecom to China Telecom in June 1997 in return for preferential access to the Chinese telecoms market. This has not happened to the degree expected, although no other telco has been able to crack the Chinese market. C&W was also seen as one of the runners to acquire IBM Global Networks (IGN). This was instead bought by AT&T earlier this week. C&W, however, outsourced the UK Cable & Wireless Communication’s applications to IBM Global Services in September by a non-competitive tender. EDS has a strong client list, according to Brown, with operations in 47 countries. Its1997 revenues were $15.2bn. Sources within the company say that EDS will fill its chief financial officer position, vacant since March, before the end of its first quarter in April.
