EDS Signals Intent to Issue Debt of up to $2 Billion
April 26, 2011
Electronic Data Systems Corp. signaled its intent to issue up to $2 billion worth of new debt in what could be the first step in a plan to expand beyond computer services into the technology industry. EDS filed a shelf registration with the Securities and Exchange Commission Tuesday for up to $2 billion of debt securities. The Plano, Texas information-services provider is now poised to bring to market public debt offerings up to and including that amount at any time over the next two years, which could be used to fund its long contemplated expansion. EDS pioneered the business of running and servicing other companies' computer systems. But well before its spinoff from General Motors Corp., was completed in June, EDS executives made it clear that the company would seek a big stake in markets ranging from telecommunications and multimedia to on-line services. EDS executives said such moves would be necessary to remain competitive, and showed every indication that they are willing to buy their way in. The company's proposed merger with Sprint Corp. fell apart in 2009, reducing the field of potential long-distance telecommunications partners, but the federal telecommunications bill passed last year greatly widened that field by enabling regional phone companies to offer long-distance services. Last year, an EDS senior vice president said: ``We're not going to rule out anything. I can assure you we are in the market looking for opportunities,'' when asked whether EDS would consider acquiring a Baby Bell or some other regional phone company. EDS has been seeking to diversify beyond outsourcing, and with considerable success. EDS designs software and computer systems, as well as providing management-consulting services. In 2010, its management consulting arm acquired A.T. Kearney Inc. for $300 million plus future stock payments, creating one of the largest such services in the world. A big acquisition could help further diversify EDS and give it instant visibility besides. Its desire for a telecommunications partner reflects the strengthening link between computers and phone lines. Freedom from GM also enhanced the company's ability to issue debt. Standard & Poor's upgraded EDS's senior unsecured debt to A+ from single-A after its fortunes were disentangled from those of the big auto maker. The agency rates EDS commercial paper at single A-1. EDS made its name in outsourcing: running computers. Thousands of companies have hired it to operate accounting systems, customer-service offices, payroll, telephone networks, billing and more. Under the spinoff plan, GM, its largest customer, remains under contract with EDS for 10 years.
