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7/28/2004
06:05 PM
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Onetime Gains Boost Bottom Line For EDS

The IT services firm says 2Q revenue rose 4%, and the sale of its product-life-cycle-management software unit put it into the black for the quarter.

EDS on Wednesday reported a second-quarter revenue gain of 4% and net income of $270 million, though the profits came from the sale of its product-life-cycle-management software business.

Revenue for the quarter ended June 30 was $5.24 billion and net income was $270 million, or 54 cents per share--but without the onetime events, the IT services firm posted a loss of $16 million, or 3 cents per share. That compares with earnings of $88 million, or 18 cents per share, in the year-ago quarter.

Contract signings during the quarter increased 25% to $4 billion on the strength of several major deals--including an eight-year, $1.1 billion agreement with Bank of America. Still, the services firm faces numerous challenges. Earlier this month, Moody's Investors Service lowered its rating on EDS's debt to junk-bond status and EDS lowered its cash-flow estimate for 2004, citing ongoing delays with the buildout of an intranet for the Navy and Marine Corps.

In a research report published Wednesday before the release of EDS's earnings, Schwab Soundview analyst Cindy Shaw said, "The negatives outweigh the positives."

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