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4/23/2002
11:18 AM
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EDS Net Income Slides In 1Q

Contract signings for the quarter were slightly lower than the same period a year ago, and the service provider's consulting and product life-cycle-management business units continue to lag.

The market's gravitational pull has finally caught up with EDS. The IT service provider Monday reported first-quarter 2002 net income down 21% from the first quarter of 2001. EDS's contract signings for the quarter were slightly lower than the same period a year ago, and the company's consulting and product life-cycle-management business units continue to lag.

EDS reported $354 million in net income on revenue of $5.34 billion for the first quarter, ended March 31. While net income was below the $446 million recorded during the first quarter of 2001, revenue exceeded last year's $4.99 billion for the first quarter. Contract signings for the quarter were $7.2 billion, below the $7.5 billion of a year ago.

EDS's Information Solutions outsourcing, Business Process Management transaction processing, and E Solutions systems-integration services divisions grew from the previous year. But the service provider's product life-cycle-management software and A.T. Kearney consulting divisions dropped 11% and 15%, respectively. The company says this decline reflects ongoing weakness in the manufacturing sector and the demand for management consulting.

EDS's PLM Solutions business has not yet lived up to the promise of becoming a $1 billion business since being launched in October. Dirk Godsey, a senior analyst with J.P. Morgan, says PLM Solutions is a business more sensitive to the technology-spending environment than, for example, operations outsourcing. But the business is still valuable to EDS because sales of its Structural Dynamics and Unigraphics products lead to additional services revenue.

Revenue from General Motors Corp., EDS's largest client, continues to decrease. EDS received $684 million in revenue from GM and its affiliates for the quarter, down from $794 million in the first quarter of 2001 and $856 million in the first quarter of 2000.

On a positive note, revenue from non-GM clients was $4.66 billion for the quarter, up 11% from the first quarter of 2001.

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