The move leaves Affiliated Computer Services (ACS) as the only current contender for a major contract that could see the transfer of 5,000 P&G IT staff worldwide.
EDS said it dropped out last week "after careful consideration of the overall transaction requirements and, more specifically, the acquisition price sought by P&G," for some of its back-office business operations.
P&G has been searching for an outsourcing partner for more than a year and a contract with ACS is expected to be signed within months. Some 5,000 IT staff at P&G could be transferred under the deal.
EDS's decision to withdraw was made public the day before the outsourcer said it planned to cut 2,000 jobs. Dick Brown, chief executive of EDS, said the P&G decision was not related to market conditions or EDS's relationship with WorldCom (see EDS admits WorldCom exposure ).
EDS is "making the same financial decisions we would have made at any given point in time," Brown said, noting that withdrawing from the contract discussions with P&G was difficult.
"We had worked very hard over many months to win this piece of business," he said. "But at the end of the day, the financial model, especially related to the acquisition cost, simply didn't make financial sense as structured."