EDS Stock Slumps

By Roy D. Follendore III

September 19, 2002

EDS stock started to slide down the preverbal shoot, taking the entire stock market with it and everyone in the know has been wondering how long something like this would take to happen. EDS stock dropped 53% today. That was a change from $36.46 a share to $17.20. A year ago EDS stock was selling for $72.40. It was reported that the EDS fiasco caused the stock market to drop to a 5 year low below 8000. This is the surface. The underlying reason is clear if you just take the time understand it. This is not about some war that make take place in Iraq. This is certainly not about the lack of Federal Contracts.

This is really about the ability of a company to compete as a result of an absolute lack of appreciation and understanding of culture, employee respect, and capability with respect to the the bottom line.

Last year about this time EDS started dumping many of their best employees. It was a systematic bloodbath of pink-slips. These were the EDS people who knew their business best. These were EDS people who could keep things going when times got tough. These were there heart and soul of the company. You can't keep the loss of these people from affecting the bottom line forever.

For the people who worked for decades with awards, promotions and excellent personal appraisals, the idea that the President of EDS had put into effect was self evident. They wanted to cut out the meat of the corporation instead of the fat. After all, if you really want to cut costs, meat burns more money faster than fat. You can easily do this within a large internal organization by laying off senior people and replacing them with junior ones who are cheaper and will not retire soon. That way the senior management can look good and get their big contract bonus. The problem was to do such a thing without the stockholders noticing. To do this you end up having to make big promises because, you must the economic evidence in check by keeping stock prices high. An even bigger problem is that without the muscle, the machine simply can no longer move forward. For the management of EDS, as far as the welfare of the corporation is concerned, they began feeding off of their own tail. That is exactly what these people see has happened to that polished fast eagle Ross Perot used to call EDS.

Many people who have left think that EDS is a shell of the company that it once was. Many people who used to work with the high caliber of people that were once there believe that they are right. The people of EDS are no longer committed to profits because they have little reason. They have been intimidated by watching those employees who have acted responsibly get admonished and canned through calculated layoffs. They are tired of hearing the propaganda of Mr. Dick Brown come from the top and have been tired of listening. The things that he wrote have come to be insulting. They are Americans tired of seeing their work subcontracted offshore to the lowest bidder. They are tired of seeing their efforts go into the multimillion dollar pockets of ruthless and greedy managers that seem to be systematically destroying their workplace.

EDS is not a company that has the ability to solve the kinds of difficult technological problems that it once could because many of the best employees are no longer with them. Another reason is because the communication that once existed no longer does. After nearly a year, this undertow is just now showing up on the bottom line. After a year, EDS stock holders are beginning to see the problem from the perspective of those employees who have been speaking out. Maybe the stockholders will now begin to ask the Board of Directors to do something about the situation and take action and turn things around. Maybe they will start the process of removing Mr. Brown and his underlings so that someone can be brought in who both they and the employees can trust.

For those employees who may have forgotten, "trust" is the most important word whose meaning has been missing from EDS management vocabulary for some time now. For those who have get hit by stock slumps, sometimes it is not the future of American technology that is really slipping when stocks dip. Sometimes it can just be the a big company politics with greedy management who have a pretty lousy sense of honor. Someday investors will come to understand that the true long term value of corporate stock is always directly tied to employees with a vested interest.

If your were not listening out there, just Don't Say I Didn't Tell You So (DSIDTYS)

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