EDS managed in its second quarter to come out 14 cents a share and $67 million ahead of the same quarter last year, despite a write-down of $101 million in anticipation of the hit it expects to take from its WorldCom partnership.
EDS in the second quarter reported a net income of $316 million and earnings of 64 cents a share on revenues of $5.5 billion. Revenue was up eight percent over last years $5.1 billion.
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, which fell far short of its record $7 billion in signings in the same year-ago quarter.
"Overall industry growth has fallen due to weaker than expected IT spending and continued caution in committing to IT services projects," said CFO Jim Daly.
Without the impact of the asset write-down, EDS would have seen operating margins of 11.7 percent but instead recorded operating margins at 9.8 percent.
For EDSs four primary lines of business, its Operations Solutions unit posted revenues of $3.6 billion; its Solutions Consulting unit posted revenues of $1.5 billion; its A.T. Kearney management consulting unit saw revenues of $307 million and its PLM Solutions unit saw $228 million in revenues.
After a bumpy start in its huge Navy Marine Corps Intranet contract, EDS during the quarter completed initial mandatory testing and received an order for 100,000 seats. To date, less than 20,000 seats have been deployed. EDS also opened a network operations center for the NMCI in Hawaii during the quarter.
EDS also in the quarter announced it is acquiring the managed hosting business of LoudCloud.
The largest contract signing in the quarter was for a 10-year, $200 million business process outsourcing contract with the Baylor Health Care System.
The era of the mega-deal could be over, with clients emphasizing shorter and less comprehensive contracts. Still, Brown said that there are more than a dozen contracts in the pipeline that are more than $1 billion. "But, more and more contracts are smaller in size," he said.
EDS expects in the current quarter to attain earnings of about 22 or 23 cents a share and for the full year expects earnings to reach $3 per share. Daly anticipated EDS may incur additional costs due to its Worldcom contract that could reach three or four cents a share.
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