Vendors in Race for Australian Contract

Wall Street oddsmakers are watching a horse race between Computer Sciences Corp. and Electronic Data Systems Corp. with bated breath.

The computer services thoroughbreds are in the stretch run for an outsourcing contract with Commonwealth Bank of Australia, the second- largest bank in that country, with $70 billion of assets.

With the contract likely to be valued at about $4.7 billion, the winner could have one of the largest such bank deals ever, according to James F. Kissane, an analyst at Bear, Stearns & Co., New York.

The contract could involve outsourcing of the Sydney-based bank's entire technology and data processing operations.

Because it would put extra pressure on profit margins in the outsourcing business that are already razor-thin, Mr. Kissane said, "I'm not clear on who's going to win it, and I'm not sure it's great for whoever wins it."

There are times when it would be better not to win "these big trophy contracts," the analyst said.

The winner is expected to be announced this summer.

International Business Machines Corp., whose IBM Services unit also competes for mega-outsourcing contracts, was not in the running due to existing deals it has with the Australian bank's competition.

Officials at Computer Sciences and EDS would not comment on the contest, but observers said both vendors are approaching the finish line aggressively.

Computer Sciences, El Segundo, Calif., has made the Asia-Pacific region a key focus for its banking and telecommunications services, according to analysts at Lehman Brothers, New York.

Australia would be a solid launching pad for the strategy.

Industry observers said that EDS also badly wants the deal, for symbolic reasons and to prove its viability in the large-deal arena.

The Plano, Tex., information services giant is still smarting over its loss last year of a major J.P. Morgan & Co. infrastructure management contract to Computer Sciences and the Pinnacle Alliance, a consortium formed for that project.

The seven-year contract, which was rumored at one time to be within EDS' grasp, was valued at $2 billion.

EDS has also made several disappointing earnings announcements in recent months.

The industry grapevine has EDS ahead of Computer Sciences. Gregory M. Gould, an analyst at Goldman, Sachs & Co., said he believed that EDS had worked with Commonwealth Bank of Australia in the past.

Mr. Gould also said Computer Sciences' officials had minimized expectations during several recent discussions and characterized their company as "the underdog."

Mr. Kissane said EDS' stock had bounced back in recent weeks in anticipation of "positive announcements on the contract-signing front."

Its share price sank to $32.875 in late April but was up to $42.50 as of the close on Friday.

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