WorldCom Woes Impact EDS Financials

By Paula Musich  |  Posted 2002-07-29 Print this article Print

Electronic Data Systems Corp. cut through the gloom with positive earnings results last week.

Electronic Data Systems Corp. cut through the gloom with positive earnings results last week. But the services companys rosy figures were muted a bit by the ongoing WorldCom Inc. crisis.

EDS, a major WorldCom partner, reported second-quarter net income of $316 million on revenues of $5.5 billion. Revenues were up 8 percent over last years $5.1 billion. Earnings beat the year-ago quarter by $67 million despite a write-down of $101 million in anticipation of lost business from joint projects with WorldCom, in Clinton, Miss. The damage might have been worse if EDS and WorldCom had succeeded with plans to sell combined outsourcing and telecommunications services, according to Julie Giera, an analyst at Giga Information Group Inc., in Cambridge, Mass. As it stands, EDS deal to manage WorldComs data centers is at greatest risk. "Because those have to run [to keep WorldComs business operating], I wouldnt be surprised if the bankruptcy court gives EDS some revenue to operate those data centers," Giera said.

EDS, like its chief competitor, IBM Global Services, saw delays in some outsourcing contract signings. EDS booked $6.2 billion in new contracts during the quarter, falling far short of its record $7 billion in signings in the same quarter a year ago. "Overall industry growth has fallen due to weaker-than-expected IT spending and continued caution in committing to IT services projects," said EDS Chief Financial Officer Jim Daly, in Plano, Texas.

After a bumpy start in its huge Navy Marine Corps Intranet contract, in which WorldCom is a primary subcontractor, EDS completed initial mandatory testing and received an order for 100,000 seats. To date, fewer than 20,000 seats have been deployed.


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