EDS earnings drop in 'tepid' market

Embattled services giant EDS has reported second-quarter earnings that were less than half of what they were a year earlier.

Embattled services giant EDS has reported second-quarter earnings less than half of what they were a year earlier.


EDS reported net income of $138m (£86m) for the quarter ending 30 June, compared with $316m (£197m) one year earlier. Excluding one-time charges, such as asset write-downs and executive severance 0pay, earnings were $167m, in line with analyst expectations.


For the rest of the year, EDS' guidance remains at the levels previously announced. Revenue is forecast to be approximately $11bn for the last six months of the year.


"Market conditions continue to be challenging," said EDS chief executive officer Michael Jordan.


"We did see an uptick in the number of new contracts up for bid in Q2, but that seems to have dropped off some as we look forward to Q3. Overall  IT services spending remains tepid and sales cycles are still pretty much stretched out."


However, Jordan told analysts that "despite all the problems, EDS remains to be a very strong franchise. We've got a solid pipeline, good backlog, high customer satisfaction and, as you all know, a very much improved cash position."


Jordan pointed to contracts with Philip Morris Companies and Barclays Bank as proof of the company's ability to win big clients, and he said he hoped the Philip Morris contract would lead to more work with the company.


The results come at a crucial time for EDS, which is going head to head with a consortium of Ernst & Young and Fujitsu in the battle for the £4bn, 10-year Inland Revenue IT contract, in partnership with Accenture.


The Inland Revenue has also blamed high-profile problems with tax credit system on the computer systems supplied by EDS and added that it may ask the services giant for compensation.


EDS, which is the second-largest provider of IT services behind IBM, has also been hit with a US Securities and Exchange Commission (SEC) investigation and recently announced plans to lay off 2% of its workforce as part of a global restructuring.


The company's goals for the rest of the year include a continuation of efforts to improve cost structure and productivity, said Jordan, who was appointed earlier this year.







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