In the News: J.P. Morgan Cancels IBM Outsourcing Deal

Wed Sep 15, 2004 09:25 AM ET

WASHINGTON (Reuters) - J.P. Morgan Chase & Co. (JPM.N: Quote, Profile, Research) said on Wednesday it was canceling a $5 billion outsourcing deal with IBM Corp., (IBM.N: Quote, Profile, Research) and planned to rehire about 4,000 workers who had been transferred to IBM under the pact.

IBM said in a U.S. Securities and Exchange Commission filing that the cancellation of its biggest financial services outsourcing deal would help its 2005 earnings per share, and would have no impact on its full-year model.

J.P. Morgan, the No. 2 U.S. bank, said following its recent merger with Bank One, it could better manage its own technology and infrastructure. It also said there will be no material impact from the cancellation.

IBM said the cancellation would improve earnings because it was still in the early stages of deployment on the contract. It also said its backlog of services will be revised when it announces its third-quarter earnings. IBM estimated a $118 billion services backlog at the end of the second quarter.

Under the seven-year deal announced in December 2002, IBM was to take over the global computing operations for J.P Morgan in a wide range of areas including retail banking, trading and securities processing, offering the bank an opportunity to cut its own spending on technology.

The 4,000 workers transferred to IBM from J.P. Morgan in early 2003.

J.P. Morgan said IBM would remain one of the largest technology partners for J.P Morgan, but the companies did not elaborate on their relationship going forward. (With additional reporting by Chris Sanders)
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