Perot’s Chance Encounter With AT&T; Chief Sparked Discussions of Merger

DALLAS — A chance meeting in a Dallas hotel lobby last spring between Texas billionaire H. Ross Perot and James E. Olson, now chief executive of American Telephone & Telegraph Co., started the chain of events that led to the failed discussions last month over AT&T; buying Perot’s Electronic Data Systems from General Motors.

The discussions took on new meaning this week in the aftermath of Perot’s ouster as chairman of EDS and after moves by General Motors to reassure EDS and its employees that their company is not for sale to AT&T; or anybody else.

Informed sources said Thursday that Perot and Olson met by accident shortly after Olson had learned he was to become AT&T;’s new chairman in September and had decided that AT&T;’s relationship with EDS needed clarification. AT&T; is EDS’s largest commercial customer other than GM.

In their 10-minute conversation, the sources said, Perot and Olson discussed the relationship and the prospect of significantly expanding their business dealings.

Nothing concrete came out of that discussion. But their subordinates picked up the ball and began discussing how they could better work together.

In the course of such conversations, AT&T; and EDS executives “had an idea about August,” said newly named EDS Chief Executive Lester M. Alberthal Jr., that both companies would prosper “if we could do a big contract inside AT&T; like we have with GM.” (GM bought EDS in 1984 to computerize all of its operations as well as to infuse some of EDS’s entrepreneurial spark into the sluggish GM bureaucracy.)

The idea caught on, and Perot and Olson were brought back into the discussions.

“Olson thought the idea was so wonderful,” Alberthal said in an interview Thursday. “And in thinking about how it could be done, (Olson) said: ‘Why don’t we just buy 80% or more of EDS?’ ” from GM.

At that point, Alberthal said, GM Chairman Roger Smith was brought into the talks. But after several days of discussions, the two sides remained so far apart on the price, Alberthal said, that the talks collapsed last month.

“GM never put EDS up for sale,” Alberthal said. “Our concept was doing a big deal, and in the process of those conversations, this idea about AT&T; buying us came up.”

AT&T; confirms that Olson and Perot met to discuss a better business relationship and that their discussions “didn’t preclude investment.”

Have the talks permanently fizzled, especially in light of Perot’s ouster Monday as a GM director and chief executive of EDS?

“The original discussions, in terms of the magnitude we were discussing, are basically off,” Alberthal said. “But discussions about selling more business to AT&T; are on, and we will keep pursuing business opportunities together.”

Only a Figurehead

AT&T; executives, informed sources say, would still like to buy EDS but figure that a deal is impossible now that Perot is only a figurehead at EDS.

“Like Ross (Perot), Jimmy (Olson) is a gambler. They could have done things that Roger Smith can’t,” said one source close to the negotiations. “We still think the synergy is far better between AT&T; and EDS than (between) EDS and GM. But it will never happen now.”

Alberthal would not discuss on Thursday the feud between Perot and Smith that led to GM’s buying out Perot’s interest in GM this week for $700 million.

But he did say he has received assurances from Perot that the maverick entrepreneur won’t leave EDS anytime soon and take as much EDS business and employees with him as he can muster.

“Ross will not do that,” said Alberthal, who has been with EDS since 1968, has been president since May and has a large and loyal following himself inside EDS. “He has made it clear to me that he is available to talk to customers or anyone else anytime I want.” The same is true of three other EDS executives and Perot confidants whom GM also bought out Monday: Morton H. Meyerson, J. Thomas Walter Jr. and William K. Gayden.

“The basic intent on their part is to go do the things they want to do,” Alberthal said. “But they’re close friends of mine. We talk daily on the phone. And they have said they are available if I need them.”

In the aftermath of Monday’s messy denouement, analysts have predicted that the worst fallout may be yet to come: a mass employee defection. Perot is a cult figure at EDS, and many employees are thought to be loyal more to him than to the company.

Damage Control

Hundreds of EDS employees huddled in front of radios Monday to keep up with Perot developments and were alternately “in a state of mourning reminiscent of when President Kennedy was killed and thrusting their fists in the air saying ‘Go, Ross,’ ” said one systems engineer who was there.

“The feeling in my group is that if he were to start a company three years down the road, he could pull 30% to 40% of the company,” he added.

Alberthal disputes predictions of mass defections. But he is spending a great deal of his time this week on damage control, nevertheless.

“The chief concern of the workers seems to be what else don’t we know about,” Alberthal said. “My answer is that nothing else is going to happen. GM’s intent is for us to stay an independent subsidiary. We have the same team in place that has been running this company for a long time, and we are as solid as before.”

After three days of meetings with GM senior executives, Alberthal said, “I walked away with the assurance that they have absolutely no intent to try to run EDS. I run the company.”

Nor, he said, has this week’s events “changed their intent” to negotiate long-term price contracts for the services that EDS provides GM, its parent company--a major bone of contention between employees of EDS and other GM subsidiaries.

He said he also received further assurances that GM still supports his goal of reducing EDS reliance on GM business by increasing non-GM business. “If we become just another GM division,” Alberthal said, “they will have admitted to the world that they spent $2.4 billion on a data processing department.”