Electronic Data Systems (EDS) has tripled its net income
and exceeded revenue expectations in its second quarter of
2004.
EDS posted net income of $270m (£148m) up from net income of
$88m in last year's second quarter. Excluding certain one-time
items, such as a gains related to the company's divestiture of its
UGS PLM Solutions unit, EDS posted a net loss of $16m.
EDS' quarterly revenue grew 4% to $5.24bn, above consensus
expectations of $5.17bn, thanks, in part, by solid execution in the
US and Europe and in vertical sectors such as communications,
government and retail.
Excluding the impact of currency fluctuations, acquisitions and
divestitures, revenue remained flat. Revenue figures for both
periods exclude UGS PLM Solutions.
The US Navy/Marine Corps Intranet (N/MCI) contract was
particularly problematic and generated an operating loss of
$171m.
EDS won the N/MCI contract in October 2000 and it was valued at
$4.1bn over five years with an additional three-year option that
could put its value at around $6.9bn. It was extended in 2002 to
seven years with a three-year option and its value rose to $8.8bn.
The project has been plagued by delays and has drained a lot of
cash from EDS.
Uncertainty related to aspects of N/MCI prompted EDS to narrow
its full-year earnings forecast and to lower its free cash flow
expectation to between $200m and $300m, from a previous range of
$300m to $500m. Revenue expectations remained unchanged to between
$20bn and $21bn.
"EDS remains a tale of two cities," said chairman and chief
executive officer Michael Jordan.
Changes implemented in the past 15 months or so by him and his
management team have spurred sales, leading EDS to sign $4bn in
contract in the quarter, up 25%, he said.
However, he added that problem contracts predating his arrival
in March 2003 continue to hobble EDS.
Juan Carlos Perez writes for IDG News Service