EDS suffers fall in income

Electronic Data Systems has reported a net income of $360m (£221m) for its fourth quarter, compared with a net income of $405m...

Electronic Data Systems has reported a net income of $360m (£221m) for its fourth quarter, compared with a net income of $405m for the same period last year 

Net income came in at $246ml. However, those results are way down from comparably adjusted net income of $427m for the same quarter last year.

Fourth-quarter total revenue decreased to $5.5bn from $5.8bn.

The Securities and Exchange Commission has been conducting a formal investigation of EDS that is focusing partly on a gigantic earnings and revenue shortfall EDS announced in September for its third and fourth fiscal quarters of fiscal 2002.

That warning shocked the market and affected the company's stock price. The shortfall is also blamed for prompting Procter & Gamble to pull back from what seemed a done deal to award EDS a multibillion-dollar outsourcing contract, believed to be among the largest in IT history.

The bankruptcies of some big clients - such as WorldCom and UAL - have also taken their toll on the company. For example, EDS took a $41m provision to write down its investment associated with leveraged aircraft leases with UAL's United Airlines.

EDS also announced plans in October to cut up to 5,520 jobs from the total of about 138,000, and to implement other cost-cutting measures.

IT analysts have warned clients to keep a close eye on their EDS engagements, to make sure that service quality doesn't slip as the company cuts costs and reduces its workforce.

For the full 2002 financial year, EDS's revenue grew slightly to $21.5bn from $21.1bn in 2001. Net income fell to $1.12bn from $1.36bn. Excluding one-time items, net income was $1.01bn, down from $1.4bn. The total value for contracts signed in 2002 was $24.4bn compared with $31.4bn last year.

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