Magazine article American Banker

CoreStates Vendors, Contenders Take It on the Chin

Magazine article American Banker

CoreStates Vendors, Contenders Take It on the Chin

Article excerpt

First Union Corp.'s pending acquisition of CoreStates Financial Corp. has thrown doubts on one outsourcing contract and killed at least one potential deal.

Andersen Consulting signed a pact with CoreStates in October to upgrade the Philadelphia bank's technology systems. That contract called for Andersen to handle about 40% of CoreStates' software and systems maintenance needs.

But the ink on the 10-year deal had barely dried when CoreStates decided two weeks ago to sell itself to First Union in a stock swap valued at about $17 billion.

Austin Adams, executive vice president at First Union, said he could not discuss details of the Andersen deal, and an Andersen spokeswoman declined to speculate on the future of the relationship. Mr. Adams said that he had just received a copy of the contract and expected several meetings with senior CoreStates and Andersen officials to discuss contract options.

"We expect to make decisions very quickly," he said, adding that First Union has also used Andersen Consulting's services.

First Union, which describes itself as a technologically savvy bank, has retail capabilities that CoreStates probably hired Andersen for, said Bill Bradway, an analyst at Meridien Research of Needham, Mass.

"That's an area where CoreStates was probably looking for benefits from a combination of sources, Andersen being one of them," he said.

GE Capital, a relative newcomer to the bank computer services field, also looks like a loser in the First Union, sources said. CoreStates had spent six months considering several vendors for data center management and telecommunications services, they said, and the General Electric unit was close to getting that contract.

"We clearly had narrowed ourselves to a short list," said Michael A. Varzally, CoreStates' chief technology processing officer. But "considering our situation with First Union, it is now inappropriate. …

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