EDS Profits Down - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


EDS Profits Down

EDS yesterday reported a decline in third-quarter earnings, blaming its continuing struggle with General Motors contracts as well as a hefty severance package of departing chairman and CEO Les Alberthal.

Net income for the quarter was $218.6 million, or 44 cents a share, excluding a one-time charge of $36.7 million related to the retirement of Alberthal. Diluted earnings were 39 cents a share. In the third quarter of 1997, net income was $246.8 million, excluding a $25.9 million charge, for diluted earnings of 47 cents a share.

Revenue for the quarter, which ended Sept. 30, was up to $4.4 billion, including the $69 million EDS received for the sale of some of its leasing portfolio. The company said it signed about $2.8 billion in new business during the quarter. This compares with revenue of $3.7 billion a year ago.

EDS's 10-year contractual commitment to service computer systems for GM , the integrator's former parent and now largest customer, continues to concern analysts. EDS pointed to its reduced profitability on contracts with GM to explain the decrease in its income for the quarter. Analysts say GM-related revenue accounts for about 25% of EDS's total revenue, down from 31% when the company was spun off in the summer of 1996.

The results were not much of a surprise to Wall Street analysts, who had expected about 39 cents a share. "The street is expecting the third quarter to be pretty negative at least on margin side," says Moshe Katri, a director for Warburg, Dillon, Reed LLC. "The company's results were negatively impacted by the GM strike and the severance pay for the retiring CEO."

But EDS's non-GM business continues to grow at a rapid rate. Non-GM-related revenue increased 24% in the third quarter, year over year. "The non-GM business will continue to grow very rapidly," says Moshe. That is necessary in order for the company to remain profitable. "Right now, EDS's GM-related business is [negatively] impacting the overall growth of the company," adds Moshe.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
The State of Cloud Computing - Fall 2020
The State of Cloud Computing - Fall 2020
Download this report to compare how cloud usage and spending patterns have changed in 2020, and how respondents think they'll evolve over the next two years.
11 Ways DevOps Is Evolving
Lisa Morgan, Freelance Writer,  2/18/2021
Graph-Based AI Enters the Enterprise Mainstream
James Kobielus, Tech Analyst, Consultant and Author,  2/16/2021
What Comes Next for AWS with Jassy to Become Amazon CEO
Joao-Pierre S. Ruth, Senior Writer,  2/4/2021
Register for InformationWeek Newsletters
Current Issue
2021 Top Enterprise IT Trends
We've identified the key trends that are poised to impact the IT landscape in 2021. Find out why they're important and how they will affect you.
White Papers
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll