EDS Earnings Strong Despite Losing Verizon Deal

For EDS, a $3.9 million Navy contract eases the sting of losing its lucrative Verizon business.

Electronic Data Systems managed a profitable quarter, growing profit 80 percent in the third quarter of 2007 on government business, it reported Nov. 1, despite losing about $300 million from one customer loss, executives said.

The company was able to grow business $100 million over the same quarter last year to $225 million in 2007 thanks mostly to government contracts, including a $3.9 billion contract with the United States Navy, said CEO Ron Rittenmayer.

Government business made up for a $300 million decline in revenue after the loss a lucrative contract with Verizon, which opted to handle IT system support in-house after its MCI acquisition in January 2006, Rittenmeyer said.

EDS (Electronic Data Systems) posted third-quarter net income of $225 million, up from $125 million a year earlier, the company said. Revenue increased to $5.63 billion from $5.29 billion.

In the Americas region, revenue rose 2 percent to $2.63 billion, and operating profit was $425 million, up 8 percent, EDS said.

The company added that it expects about 20 percent of 12,000 U.S. employees offered early retirement will have accepted by the time all deadlines pass.


To read more about EDS's deal with the United States Navy, click here.

EDS let 5,000 employees go in 2006, the company said, and CEO Ron Rittenmeyer said the company would continue restructuring and employing "workforce capacity management" strategies that will further eliminate non-core operating roles.

"Further reductions [in personnel] will cut across all U.S. operations," he said, adding that the ultimate goal was to eliminate the need for the work itself, not simply reducing the number of employees.

The company also stated that it has nearly doubled the number of employees in "cost advantaged locations" such as India, Hungary, Brazil, Argentina and China.


Check out eWEEK.com's Infrastructure Center for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.