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EDS Buys SABRE Assets &
Wins $ 2.2 Billion Contract
Thursday March 15, 12:24 pm Eastern Time
By Ian Simpson
NEW YORK, March 15 (Reuters) - U.S. computer services firm Electronic Data Systems Corp.
said on Thursday it was buying airline data centers and other technology assets for $670 million from travel reservations
company Sabre Holdings Corp. , which in turn awarded EDS a 10-year service contract worth $2.2
billion.
Plano, Texas-based EDS said the deal would make it the No.1 provider of information technology infrastructure services
for airlines.
It adds such airline clients as American Airlines and US Airways Group Inc.
to a current list that includes Continental Airlines Inc. , British Airways Plc
and America West
Sabre's sale of the assets would let the Fort Worth, Texas-based operator of the largest travel reservations
computer system shed a slower-growing and lower-margin business.
Analysts said the deal underscored corporations' desire to shed costly information technology assets and let outsiders
run them.
"We believe this is a substantial win for EDS," Dick Brown, the company's chairman and chief executive, said in a telephone
conference call with analysts.
He said the acquisition and the service contract would add $400 million to revenues in the second half of 2001.
Sabre shares rose $4.71, or 13 percent, to $41.01 on the New York Stock Exchange shortly before midday, after
trading in them had been delayed by an order imbalance. EDS was up $1.20 at $57.95. Markets overall were firmer.
Gary Helmig, an analyst with Wit Soundview in Stamford, Conn., said the deal was part of a trend where governments
and corporations eliminated headaches by outsourcing their computer systems.
"I think investors are going to be looking at outsourcing companies as a place to be in this market," he said.
In the deal, Sabre would sell EDS its airline infrastructure outsourcing business and internal information technology (IT)
infrastructure assets for $670 million.
EDS won a $2.2 billion, 10-year services contract from Sabre, which will outsource the management of its information
technology systems to the company.
The companies also have agreed to jointly market information technology products and services to the travel and
transportation industry.
About 4,200 Sabre employees will move to EDS under the deal.
Sabre Chairman, Chief Executive and President William Hannigan said that before the agreement, the company had
forecast "longer-term" revenue growth of more than 15 percent and earnings growth of 17 to 20 percent.
"We're now saying, take the revenue number to the high teens and the earnings north of 20 percent," he said in a
telephone conference call.
Sabre plans to use proceeds from the sale to cut its debt from $879 million to about $300 million, he said.
The company expects the transaction to add to its earnings slightly this year and more heavily in 2002 and 2003. EDS said
the agreement would be neutral to its earnings per share in 2001. |
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