A review of its Navy Marine Corps Intranet (NMCI)
contract has forced services provider Electronic Data Systems (EDS)
to again postpone its financial report for its third fiscal
quarter.
EDS also announced its audit committee is conducting an internal
investigation on a separate matter.
The company had scheduled its third quarter report for 25
October, but moved it to 3 November, citing a need to complete a
review of a possible asset impairment related to its problematic
$8.8bn (£4.8bn) NMCI contract.
This contract, awarded in 2000, has been plagued by delays and
mismatched expectations and has drained significant cash from
EDS.
On 3 November, EDS said it was once again postponing its
earnings report because, although it is confirming the impairment,
it has not completed the related review; at issue are the timing
and the amount of the write-down.
EDS also disclosed that the company's audit committee has
launched an internal accounting investigation of a matter unrelated
to the NMCI issue. The audit committee began an investigation on 27
October centred on issues relating to quarterly bonus plan accruals
in 2003 and 2004.
The investigation came as a recommendation from the company's
external auditor KPMG, which brought the issues to the attention of
the audit committee.
Independent counsel and accounting advisers are assisting the
audit committee with this investigation, which revolves around
money EDS sets aside and accrues as an expense for the purpose of
bonus payments it later makes to employees, said EDS spokesman
Kevin Lightfoot.
This investigation could lead to revisions of EDS' quarterly
financial statements from 2003, but the company does not think they
will affect its reported financial results for the full year of
2003, EDS said.
KPMG will not be able to complete its review of EDS' financial
statements issue for its third quarter until the audit committee
finishes its investigation, EDS said.
The audit committee investigation is not expected to be finished
before 9 November, which is EDS' deadline for filing its 10-Q form
with the US Securities Exchange Commission (SEC).
EDS will either file the 10-Q without the results of the
investigation, or, if the investigation is expected to end before
15 November, it will request an extension from the SEC, Lightfoot
said.
The company is not at this point saying when it plans to issue
its third-quarter financial report, Lightfoot said.
EDS does not expect that the accounting probe will have a
"material adverse effect" on its finances or its credit and the
company reaffirmed its previously-announced third-quarter and
full-year financial forecasts.
The company expects third-quarter revenue of between $4.9bn to
$5bn. For the full year, it expects between $20bn and $21bn in
revenue.
EDS, which is on a quest to cut $3bn in costs, last week
announced it is offering early retirement options to 17% of its US
employees, in the hopes that about half, or about 4,600 employees,
will accept.
EDS is the world's second-largest IT services provider after
IBM.
Juan Carlos Perez writes for IDG News Service