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What was he thinking? In August, well into the tech industry's season of discontent, Richard H. Brown, the 55-year-old CEO of Electronic Data Systems Corp. (EDS
), told institutional investors and analysts that his company was faring better than its rivals: The Plano (Tex.) IT-services giant had plenty of deals in the pipeline that would assure big-time growth in the near future. He didn't say this just once, but over and over as he traveled around the country.
Six weeks later, on Sept. 18, Brown had to take it all back. Believe it or not, the recession had snuck up on EDS. Instead of growing, revenues would drop in the third and fourth quarters, and profits would sink by as much as 84%. It wasn't just the sluggish economy: The company had underestimated its costs on a few large contracts and had to take a $31 million charge. Investors sliced EDS's market value in half.
That wasn't the end of Brown's fiascos. Less than a week later, an analyst revealed that EDS had made an undisclosed $225 million payment to settle put options and purchase agreements on its own stock that had been entered into months earlier when shares were near their peak. Brown, who declined to comment, has said he has no plans to leave EDS. Sounds as if his optimism is getting the better of him again.