Struggling computer services firm EDS has sold off its subscription fulfillment business to New York-based AMREP Corporation
for $10 million in cash and assumed liabilities, the companies said today.
EDS said it expects to net about $27 million in cash overall from the transaction, including the purchase price plus an estimated $21 million in retained cash and receivables related to the business.
The sale helps the Plano, Texas EDS follow through on its plan to shed about $500 million worth of non-core assets, which it announced last September on news that its net profit had dropped by 59 percent compared to the third quarter of 2001.
Like other vendors of technology and vendor services, EDS is laboring through a stagnant market for new IT spending. It is also looking to halt a slide in its stock price amid a difficult spending environment in outsourcing and a federal regulatory probe over its prior guidance.
The subscription fulfillment business employs about 800 people mostly based in Louisville, Colorado.
AMREP is the parent company of Kable News Company, which distributes magazines to wholesalers and provides subscription fulfillment and related services to publishers and others.
It said the purchase of the fulfillment business from EDS would more than double its revenues in this area of the business and help establish Kable as the second largest provider of subscription fulfillment services.
EDS, for its part, is looking to regain its stride after recent turmoil that hit the company after it backed off its bullish outlook on IT spending, which later came back to haunt its stock price.
In a management shakeup at EDS last week, CEO Richard Brown resigned and was replaced by the former CEO of CBS, Michael Jordan. The company also brought back retired top EDS executive Jeff Heller as president and COO.
