EDS cuts forecast on United Airlines bankruptcy

Electronic Data Systems has lowered its fourth-quarter and full-year earnings expectations as a result of yesterday's bankruptcy...

Electronic Data Systems has lowered its fourth-quarter and full-year earnings expectations as a result of yesterday's bankruptcy protection filing from UAL, the parent company of United Airlines.

EDS, the world's second largest provider of IT services, has seen its earnings suffer this year from other high-profile bankruptcies of clients and partners, including WorldCom and US Airways Group.

Its earnings would be reduced by aircraft leases with United Airlines, which were agreed in 1991. EDS said writing down the value of the leases would cut its fourth-quarter and full-year earnings by five cents per share.

EDS added the balance of its investment on the aircraft leases is about $40m (£25.4m), and that it did not expect a quick decision from United about what to do with the leases now that the carrier has sought bankruptcy protection from creditors.

The company, which operates computer systems for other companies and government agencies, has also been affected by weak new sales and by slow growth on existing contracts, particularly in Europe. In October, EDS announced it would cut its workforce worldwide by up to 4% over the coming months.

EDS closed its third quarter, which ended 30 September, with net income of $86m.

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