Plano, Texas, Oct. 9 (Bloomberg) -- Electronic Data Systems Corp. employees who were given the computer-services company's stock for their retirement plans have lost $407.4 million in value this year as the shares tumbled on concerns about falling profit and cash flow.

The value of Electronic Data stock in the 401(k) fund has dwindled to $126.4 million from $533.8 million last year even as the number of shares rose by a third to 10.5 million, spokeswoman Kristin Dobrowolski said. The plan, also including stock and bond mutual funds, had total assets of $2.56 billion at the end of 2001.

Workers are angry after betting on Electronic Data shares, which rose 68 percent in the three years after Richard Brown was named chief executive in 1998, then sank 83 percent so far this year. The world's second-biggest computer-services seller says profit is falling as clients such as US Airways Group Inc. scale back or renegotiate contracts, and new business is drying up.

``I'm bitter, yeah. I feel like I was let down,'' said Steve Milo, 45, who worked at a General Motors Corp. factory in Indianapolis for Electronic Data until he was fired in July after 17 years with the company. His retirement savings is in the company's 401(k) plan, including about 40 percent in Electronic Data stock.

Brown, who was paid $1.5 million in salary and a bonus worth $7 million last year, owned 1.15 million Electronic Data shares as of Feb. 7, according to the company's latest proxy.

Company's Contribution

Electronic Data, founded by H. Ross Perot, gives 25 cents in stock to employees for every $1 they contribute to the savings plan, for as much as 6 percent of their wages. Employees must hang on to the stock for two years. Hewitt Associates Inc. of Lincolnshire, Illinois, manages the plan.

On Sept. 19, Electronic Data shares fell 53 percent after the company slashed its fourth-quarter profit forecast to a range of 12 cents to 15 cents a share. Analysts on average had estimated that Electronic Data would earn 74 cents. The company blamed the shrinking value of existing computer-services contracts as well as US Airways' bankruptcy case.

The shares declined 29 percent more Sept. 24 after Merrill Lynch & Co. analyst Stephen McClellan cut his rating to ``sell'' on concern about the company's cash flow.

The analyst, who has covered Electronic Data for 31 years, said declining cash flow might make it harder for the company to compete for large contracts, which require up-front investments.

Procter & Gamble Co., the largest U.S. household-goods maker, said Oct. 2 that it delayed indefinitely a decision on hiring Electronic Data to run back-office operations such as computer maintenance.

Electronic Data fell 56 cents, or 4.7 percent, to $11.48 at 11:19 a.m. in New York Stock Exchange composite trading. The Plano, Texas-based company said Oct. 1 that the U.S. Securities and Exchange Commission started an inquiry into the reduced forecast and the company's contracts to buy its own stock.

Potential Lawsuit

The company can expect to be sued by employees who lost money, said Eli Gottesdiener, whose law firm represents Enron Corp. workers suing to recover 401(k) losses caused by the collapse of the energy trader's stock. More than 60 percent of Enron's 401(k) plan assets were in Enron shares. Workers lost $850 million when the company filed for bankruptcy protection Dec. 2.

``Law firms can file on behalf of employees alleging EDS violated fiduciary duties by offering EDS stock knowing it was an imprudent investment,'' Gottesdiener said.

Speaking at a Treasury & Risk Management conference in New York last week, David Nixon, Electronic Data's investment director, declined to discuss the drop in Electronic Data shares or the company's potential liability for employee 401(k) losses.

Stock Ownership

In April, workers had 20 percent, or $360 billion, of the $1.8 trillion in assets held in corporate 401(k) retirement plans in the stocks of their employers, said Joshua Dietch, a consultant at Cerulli Associates Inc., a Boston-based research firm.

Global Crossing Ltd. Chairman Gary Winnick said Oct. 1 he will use $25 million of his own money to compensate employee for losses in the 401(k) plan of the bankrupt data-network company.

``I let them down,'' Winnick told a congressional committee investigating potential wrongdoing at Global Crossing and at Qwest Communications International Inc.

After Enron's collapse, Dell Computer Corp.'s Chief Financial Officer James Schneider and corporate benefits experts urged workers to hold fewer shares of their own employers in retirement accounts. For some, the advice may have come too late.