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SABRE To Quit Outsourcing Business - As Reported By Travel Distribution Review 

"Travel Distribution Report ; 19-Oct-2000

Sabre to abandon IT outsourcing work, searches for firm to take over
business

In a dramatic about-face, Sabre has decided to forsake its business of
providing information technology services to airlines and others, and is
attempting to sell that business by year's end.

Under its plan, Sabre will move from being a major provider of IT services to a buyer of such services, outsourcing even its own internal IT
requirements.

The company is considering proposals from outside service providers to
acquire its outsourcing contracts, take over its multi-host service for
airlines, and provide the company with various IT services, including the operation of its data centers in Tulsa, Okla., and Dallas. The contractor will also administer Sabre's network services agreement with SITA.

Proposals were submitted last Friday. Sabre's RFP stipulated that the
bidders must be able to close the deal by Dec.31. However, industry sources said it will be difficult, if not impossible, to meet that deadline.

Goldman Sachs is managing the sale. Contenders for the business are
generally agreed to be EDS, IBM and CSC. In addition, Perot Systems and Hewlett Packard also may be bidders. All these companies failed to return calls from Travel Distribution Report.

Bill Hannigan, who assumed the chairmanship of the company last December, has been hinting that the IT services business is not a priority of Sabre. It's regarded as low margin, very competitive, and highly cyclical, depending on which airlines are seeking help at the moment.

Catalysts for Sabre's decision to quit the outsourcing business are
believed to be its loss of the big British Airways outsourcing contract to
Amadeus and the uncertainty of its contract with US Airways if it were to merge with United Airlines, as the two airlines are attempting to do. Earlier, it lost the Canadian Airlines outsourcing business when that carrier merged with Air Canada.

Brad Boston, who was in charge of Sabre's outsourcing and software
business, left the company last summer, reportedly due to policy
differences with Hannigan. Boston did not return calls from TDR.

Hannigan also declined to speak with TDR, saying the company doesn't
comment on rumors. Details of this story were gleaned from securities
analysts, many of whom have been briefed on Sabre's plans, as well as various industry sources who asked not to be named.

Information technology solutions, as Sabre calls its outsourcing business,
produced $953 million of revenue in the fiscal year ended Dec.31, 1999, or about 39 percent of the company's total revenue. However, that segment accounted for only $53 million of operating income-a mere 14 percent of the company total.

The company has warned analysts that outsourcing revenues will not grow this year. Indeed, Sabre financial reports issued yesterday show that the IT services business had a 10 percent decline in revenues from 3Q/99 to 3Q/00.

It was not immediately clear exactly which IT businesses Sabre will elect
to keep. Some speculate that its IT consulting work, as well as sales of
previously developed software, will continue. Its GDS business, which
accounts for a majority of its revenue, would not be affected.

Analysts generally hailed Sabre's plans. Jennifer King, who follows Sabre
for Merrill Lynch, said the prospective sale "probably will be good for
margins over the long term." She added, "I sort of think the uncertainty
over the US Airways contract may have motivated them."

Another analyst, who insisted on anonymity, called this "a great move from the investors' perspective. . . . It's very difficult to own stock in a
company that faces so many hit-or-miss opportunities."

This analyst said the new CEO has put Sabre on the right course: "I give
Hannigan a lot of credit. Their advantage in travel is travel management,
not IT."