Big Drop-Off In Profit For EDS - InformationWeek

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Big Drop-Off In Profit For EDS

Third-quarter profit falls 59% and new contracts are down by more than half.

EDS plans to cut 1,000 jobs by year's end and shift others overseas following a third quarter that saw profit fall 59% and new contracts tumble by more than half.

The computer-services company said Wednesday that it earned $86 million, or 18 cents per share, for the quarter ended Sept. 30. That was higher than the company's own expectation of 15 cents per share, but down drastically from the year-ago quarter, when EDS earned $212 million, or 44 cents per share.

Revenue for the quarter fell to $5.4 billion from $5.6 billion a year earlier. EDS execs blamed the drop in new contracts on a difficult market for tech services. New signings slid to $3 billion from $6.8 billion a year ago.

Earlier this month, CEO Richard Brown warned employees that the company would cut an undisclosed number of jobs to cope with a slowdown in business. Wednesday, the company said the cuts would equal 3% to 4% of the workforce, starting with 800 to 1,000 jobs by year's end. EDS also said it would shift 1,500 U.S. jobs to India, Brazil, Ireland, and the Czech Republic in another cost-saving move.

The company said it would also cut other overhead expenses by $75 million next year and sell several business units it didn't identify to raise more than $500 million.

A statement on the company's Web site says EDS's balance sheet is strong. "EDS has all the resources it needs from its operations to serve current clients and pursue new business. However, in this economic climate, we are focusing on new business opportunities, including megadeals, that generate near-term revenue, earnings, and cash flow.

The Securities and Exchange Commission is looking into events leading to EDS's earnings warning last month and a series of suspicious stock transactions.

In the first nine months, EDS earned $755 million, or $1.54 per share, on revenue of $16.2 billion--down from $958 million, or $2.04 per share, on $15.6 billion in sales in the first nine months of 2001.

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