Electronic Data Systems' (EDS) second-quarter earnings were dragged
down significantly by the company's relationship with bankrupt
WorldCom, EDS said in a statement.
EDS had set aside $101m (£64.1m) in reserves for its contractual
relationship with WorldCom. However, it is unclear whether the
entire $101m would be necessary, the company said.
EDS' earnings per share came in at 64 cents, on net income of $316m
(£200m), for the second quarter that ended 30 June. Analysts polled
by Thomson Financial/First Call had expected 76 cents in earnings
per share.
Last year's second quarter, EDS' earning per share came in at 62
cents, on net income of $300m.
However, EDS did meet revenue expectations, reporting revenue of
$5.5bn (£3.5bn), up 8% from last year's second quarter.
Third-quarter earnings per share will be either eight cents or nine
cents below previous expectations because the WorldCom
relationship, EDS said.
EDS' stock was battered soon after WorldCom's accounting
irregularities were disclosed in late June, and it has not
recovered because of investor concerns that WorldCom's woes would
affect EDS' bottom line and cause telecommunications service
disruptions for EDS and its customers. WorldCom provides telecoms
services for EDS and EDS clients.
EDS is the world's second-largest provider of IT services, behind
IBM's services unit.
WorldCom granted EDS an 11-year, $6.4bn (£4.1bn) IT services
outsourcing contract in 1999. Likewise, EDS granted WorldCom an
11-year, $6bn (£3.8bn) contract for telecommunications services in
the same year.