Thursday, September 16, 2004

The New York Times > Business > News Analysis: I.B.M. Shrugs Off Loss of a Service Contract It Once Flaunted

The New York Times > Business > News Analysis: I.B.M. Shrugs Off Loss of a Service Contract It Once Flaunted "Back in December 2002, when J. P. Morgan Chase announced a seven-year, $5 billion deal to outsource much of its data processing to I.B.M., both companies bragged that the contract - the largest of its kind for I.B.M. - would reduce costs, create value and propel innovation at J. P. Morgan.
Now both companies are saying, uh, never mind.
In a major blow to I.B.M.'s grand corporate strategy of providing technology services to companies large and small around the globe, J. P. Morgan Chase said yesterday that it was pulling the plug on the contract less than two years into its existence. The 4,000 J. P. Morgan employees who moved to the International Business Machines Corporation as part of the deal will return to the bank early next year.
...
"What's really needed is some clarity on this issue," said Mr. Fleckenstein, who has bet against I.B.M. in his portfolio. "They have been crowing about on-demand and how great their backlog is. If losing the contract is a good thing, why is getting more of these types of contracts also a good thing? No facts are given on this, the supposed wave of the future for their business."
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