EDS to Buy Systemhouse as Part of Alliance With MCI

Electronic Data Systems Corp. agreed to buy MCI WorldCom Inc.’s Systemhouse unit for $1.65 billion in cash as part of a broader alliance that pairs the second-biggest U.S. computer-services provider with one of the world’s most aggressive telephone companies.

EDS and MCI, the No. 2 U.S. long-distance provider, also would switch about 13,000 employees as part of the alliance, one of the biggest in the computer-services industry.

The two companies plan to jointly market their services to manage other companies’ computer and telephone systems in a bid to provide a broader range of voice, data and computer services to customers.

Under the pact, EDS will collect $5 billion to $7 billion to run MCI’s computer systems for 10 years. In exchange, MCI will handle phone services for EDS and its customers valued at $6 billion to $8.5 billion.

More than 12,000 MCI WorldCom and Systemhouse employees, mainly in the U.S. and Canada, would be transferred to EDS, which is based in the Dallas suburb of Plano, Texas. MCI WorldCom, based in Jackson, Miss., would take on about 1,000 EDS network employees from around the world.

The agreement with EDS would shed a business that had slowed MCI Chief Executive Bernard Ebbers’ global phone strategy and give him cash for expansion. Ebbers and Vice Chairman John Sidgmore, who inherited Systemhouse when WorldCom bought MCI last year, realized the unit was too small to compete.

MCI WorldCom plans to invest most of the $1.65 billion in its burgeoning international businesses, Sidgmore said.

For EDS, the pact is in line with new Chairman Dick Brown’s plan to use acquisitions to revive earnings growth. Brown, a telecom veteran, took over as chairman last month.

In Nasdaq trading, MCI WorldCom rose $4.19 to close at $80.44. EDS gained $2.44 to close at $48.31 on the New York Stock Exchange.