The Southwestern Historical Quarterly, Volume 94, July 1990 - April, 1991 Page: 486

Southwestern Hzstorical Quarterly

could earn as a superstar salesman. He left IBM in 1962 to form Elec-
tronic Data Systems (EDS). A shoestring operation at first, EDS carved
out a new kind of business, now called, in the jargon of computerspeak,
"facilities management." Perot and his small team began by selling the
use of spare capacity in mainframe computers owned by large firms.
For reasonable fees, EDS provided services for small (and, later, large)
companies that needed lots of data processing. Meanwhile, EDS paid
rental to the firms with spare capacity, and pocketed the very substan-
tial difference. Soon EDS signed up lots of small fry, plus a few large
users such as Lay's Potato Chips, Mercantile Security Life, and several
state Medicare and Medicaid services.
Perot became very rich very fast. When he took EDS public in 1968,
at a share price of $16.50, his own 9.3 million shares made him an in-
stant multimillionaire. EDS's business continued to thrive beyond all
expectations, and by 1970 its stock was selling at $16o per share. This
made Perot a billionaire and soon a celebrity as well. His activities
broadened. A superpatriot, he sponsored the Christmas-dinners-for-
POWs affair in 1969, and in 1978 engineered a dramatic rescue of EDS
employees from Iran, an episode dramatized in Ken Follett's bestseller
of 1983, On Wings of Eagles. In Texas, Perot headed up the first war on
drugs and later the controversial reform of Texas schools, which
barred from extracurricular activities all students whose academic per-
formance fell below a C average.
In 1984, while Perot was still working on educational reform, invest-
ment bankers at Salomon Brothers proposed that General Motors pur-
chase EDS and use its renowned computer expertise to upgrade the
car company's own huge and varied information systems. After long
negotiations, Perot agreed to a merger through an exchange of shares.
Perhaps naively, he had satisfied himself through a series of written
agreements with GM Chairman Roger Smith that EDS could remain
relatively independent, with its own management system and incentive
compensation plans. By the terms of the accord, Perot would retain full
control. Or so he thought.
Not long after the celebration of this corporate marriage, it became
clear that the honeymoon would be brief. EDS's nimble, entrepreneurial
corporate culture differed profoundly from that of" cumbersome, mul-
tilayered General Motors. When EDS's experts moved in to reform
computer operations, they were resisted by almost all GM divisions.
When Perot offered his advice on streamlining GM's operations, Roger
Smith and other executives became furious. Almost daily, irresistible
forces met immovable objects. GM's top management soon decided
that Perot had to go, and Roger Smith was willing to buy him out at a
high price. When the deal was done in December 1986, the payoff to
Perot, GM's largest single stockholder, exceeded $740 million.

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