EDS pulls out of 'largest ever' outsourcing deal

EDS has pulled out of its planned contract with Procter and Gamble (P&G).

The Texas based IT services giant said it has decided to withdraw its proposal for the largest outsourcing deal ever, reported to be worth more than $1bn per year.

EDS claimed the contract was unacceptably risky because P&G's need for IT support services would have been too expensive for EDS to sustain.

The company said in a statement: "The decision to terminate discussions was made after careful consideration of the overall transaction requirements and more specifically, the acquisition price sought by P&G for intangibles associated with the related business assets."

P&G was originally planning to outsource 80 per cent of all of its back-end systems, such as staff travel, payroll and accounting.

EDS is also in line to lose a further $12bn outsourcing contract with WorldCom. If so, the losses will amount to three per cent of its annual income.

WorldCom signed the 11-year, $12.5bn deal with EDS in 1999. The outsourcing pact was to have generated annual revenues of $500m to $600m for EDS until 2010.