By Jaime S. Jordan
The Associated Press

DALLAS - Electronic Data Systems Corp. ended its three-year stint in the software development industry, announcing Sunday it was selling its product design software business to a trio of private investment firms for $2.05 billion cash.

The sale of UGS PLM Solutions puts EDS a step closer to the company's goal of zero net debt by the end of 2004, EDS spokesman Sean Healy said. UGS PLM Solutions, which is based at EDS's Plano, Texas, headquarters, makes product design and development software.

Bain Capital LLC of Boston, Silver Lake Partners LP of Menlo Park, Calif., and New York-based Warburg Pincus LLC purchased the business.

Healy said the subsidiary's sale will help EDS, which manages computers systems for other companies, "certainly improves our financial position and competitive flexibility."

UGS PLM Solutions has about 5,000 employees.

Bill Janeway, Warburg Pincus' vice chairman, told The Associated Press Sunday he doesn't anticipate any major changes in the company's operation. Janeway said he supports the management team already led by UGS PLM Solutions president and chief executive Tony Affuso.

Former EDS chief executive Dick Brown formed UGS PLM Solutions in 2001 as a way to lure more customers and to make sales to high profile clientele such as General Motors Co.

Companies using the unit's software include Boeing Co., Samsung Electronics, Nokia Corp. and Mitsubishi Electric Corp.

Affuso said he was "delighted to have the opportunity to partner with investors who have significant software experience and a growth-oriented long term approach to building value."

UBS analyst Adam Frisch, however, questioned the reasoning behind the sale.

"While the extra balance sheet cushion potentially afforded by a full or partial divestiture of PLM certainly can't hurt EDS' liquidity position, we do not believe this transaction would materially soften credit rating agencies' operational concerns," he told The Dallas Morning News.

Warburg Pincus has 125 other companies in its portfolio, many of which are technology or enterprise software businesses.

Andrew Balson, a managing director at Bain Capital, said his company was excited about the transaction.

EDS reported 2003 revenue of $21.5 billion.

Current chief executive Michael H. Jordan, a former CBS chairman, has announced 5,200 layoffs, assembled a new management team, outlined a new strategy and predicted that the company's fortunes will turn around by the end of this year.

EDS, however, has struggled to win new business and faces the threat of a downgrade of its debt to junk status.

Two weeks ago, the company said the Securities and Exchange Commission has asked for information about the company's write-down of a $6.7 billion contract with the Navy.

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