EDS results dragged down by WorldCom

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EDS results dragged down by WorldCom

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.

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