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June 5, 1988

PEROT SYSTEMS MUST WAIT UNTIL LATE 1989 TO TAKE ANY PROFITS

By CBR Staff Writer

Ross Perot duly unveiled his new company and announced details of its contract with the US Postal Service (CI No 942). The new company is to be called Perot Systems Corp, and he has now managed to entice eight mainly middle-rank people – including three corporate vice-presidents – from his original creation, Electronic Data Systems: he says they include people in information systems, marketing and government affairs. The contract with the Postal Service runs for 10 years, and the assignment is to advise it one how to save money so that postal rates can be held to only one more rise between now and the end of the century. Perot Systems is prohibited from taking a profit from the contract before late 1989, because part of Perot’s severance agreement with General Motors Corp required that he not compete for profit with Electronic Data Systems until then: EDS has a major contract with the Postal Service. The initial analysis contract is worth $500,000 and covers review of mail transport, transportation equipment, telecommunications, delivery services and revenue protection – anticipating and fighting off competition. Any cost savings achieved as a result of Perot Systems’ work will be shared between the Postal Service and the company under a formula that has yet to be agreed. HWGA – Here We Go Again – Limited Partnership, owned by Mr Perot and his family, will put up all the capital for the new company, but will hold only 40% of the stock, with the other 60% being set aside for employee stock incentives: he wants every employee of Perot Systems to be a shareholder. The news was received extremely badly on Wall Street: General Motors’ Class E shares, which pay dividends according to the performance of EDS, plunged $2.75 to $39.875 in heavy trading.

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