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6/30/2003
05:40 PM
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MCI Bankruptcy Crimps EDS Cash Flow

A $98 million payment's in limbo. On the other hand, EDS did win a $27 million HR-services contract.

EDS says its initial cash-flow projection assumed a payment from MCI of $98 million by June 30. Now, however, EDS says it won't receive payment until later in the year. EDS says it still expects its free cash flow for fiscal 2003 to fall between $800 million and $1 billion

Cash flow is increasingly a problem for EDS, the second-largest player in a market that usually requires vendors to make considerable upfront investments to secure a contract. Last week, the company said it would issue $1.7 billion in long-term debt to raise cash even as its credit rating was being downgraded to just above junk-bond status by Moody's Investors Service. Analysts have also said EDS isn't likely to realize any profit from its biggest contract--the installation of a massive intranet for the Navy and Marine Corps.

EDS did get some good news Monday, though. It says it's been awarded a five-year, $27 million contract to provide HR services to IT integration-and-procurement company World Wide Technology Inc. Under the deal, EDS will take over the hiring, managing, and paying of professional-services contractors for World Wide. Research firm Giga Information Group says that contract labor globally is a $125 billion market with more than 16,000 suppliers. In trading today, the price of EDS shares was unchanged at $21.45.

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