Electronic Data Systems Inc. Thursday reported decreases across the board in earnings, net income and revenues for its fourth quarter, but the IT services giant managed to beat First Call consensus on earnings by three cents.
Net income for the fourth quarter was $246 million, compared to $427 million in the same year-ago quarter. The Plano, Texas, IT services provider earned 51 cents per share—beating Wall Streets projections of 48 cents. Revenues were $5.5 billion versus $5.8 billion for the year-earlier period.
Seeking to re-establish its credibility with Wall Street after a big miss on its earnings projections for the third quarter of last year, EDS CEO Dick Brown said during todays conference call that "earnings and revenue were in line with our September estimates."
The tough fourth quarter saw EDS stock hammered as a result of its earnings slip, and the company worked to renegotiate contracts with a couple of large clients in Chapter 11 bankruptcy, including WorldCom and US Airways. The company was also buffeted by the same weakness in discretionary spending among existing outsourcing clients that plagued its competitors such as Computer Sciences Corp.
Last month EDS announced that its chief financial officer, Jim Daly, would move to a new position as executive vice president of Client Solutions, Global Sales and Marketing. Robert Swan, a former TRW executive, takes over as CFO on Monday. And in mid-January, the Securities and Exchange Commission announced it was launching a formal investigation into EDSs accounting practices.
During the quarter EDS signed new contracts totaling $8.1 billion versus $10.1 billion a year ago.
For the full year, EDS earned $2.28 per share, compared to earnings of $2.81 for 2001. Net income was $1.12 billion, compared to $1.36 billion for 2001. Revenues for the full year were up 2 percent to $21.5 billion compared to $21.1 billion for 2001.
EDS was cautious in its outlook for 2003. It expects the entire IT services market to grow in the "low to mid-single digits, with all of the growth in the latter part of the year," said Daly. EDS estimates that it will earn 30 to 35 cents a share in its first quarter, and $1.80 to $2.00 per share for the full year. The company expects revenues to decline slightly for the first quarter of 2003 but increase slightly for the full year. Both projections were in the low- to mid-single digits.
Rival Computer Sciences Corp. meanwhile posted a nearly 20 percent rise in net income for its third fiscal quarter at $105.7 million or 61 cents a share—a penny ahead of Wall Street expectations.
The net income gain came despite lower revenues for the quarter, ended December 27. The El Segundo, Calif., company generated revenues of $2.79 billion, down 3.5 percent for the year-earlier revenues of $2.89.
Much of the revenue decline resulted from an 11 percent decrease in U.S. commercial revenue. Company officials blamed the decrease on soft demand for IT consulting project work and weak demand among financial services firms for commercial IT services. The federal government sector made up for the difference with a 7.2 percent revenue increase at $789.6 million.
"The total federal IT budget for the governments fiscal 2003 is materially greater than last year and the Department of Defense budget shows the largest increase in approximately 20 years," said CSCs CEO Van Honeycutt in a prepared statement. "We are currently addressing a 16-month federal pipeline of approximately $24 billion, which is about evenly split between civil agencies and the Department of Defense, including modernization of systems and infrastructure, IT and business process outsourcing, homeland security and e-government initiatives," he added.
During the quarter, CSC saw major new business awards that totaled $1.8 billion.
CSC expects earnings per share for its fourth fiscal quarter to be about 95 cents a share and revenues to decrease 2 to 4 percent.