EDS Reports Drop In Revenue, Profit

Last year wasn't a good one for EDS, and officials at the services firm aren't optimistic about this one, either.

EDS reported Thursday that its net income for 2002 slid 21%, to $1.1 billion, or $2.28 per share, compared with $1.4 billion, or $2.81 per share, in 2001. Revenue increased slightly from $21.1 billion a year ago to $21.5 billion in 2002. Given what company officials call "a cautious view of the marketplace," EDS says it expects to post even weaker numbers in 2003 whether or not there's war in the Middle East.

The company also reported a decline in nonadjusted fourth-quarter net income--from $405 million, or 82 cents per share, in 2001 to $360 million, or 75 cents per share, in the quarter ended Dec. 31. Meanwhile, fourth-quarter revenue dropped 5%, to $5.5 billion, compared with $5.8 billion a year ago. Results for the quarter include a $41 million charge against earnings the company took to cover losses sustained through investments in now-bankrupt United Airlines' lease business.

EDS, which runs computer systems for other companies and government agencies, sold its consumer network services and subscription-fulfillment units in December.

Richard Brown, EDS's chairman and CEO, says market conditions in the technology-services business "remained challenging in the fourth quarter as companies continued to limit discretionary spending." Brown also says EDS is becoming more selective in the business it takes on. Analysts have criticized EDS over large contracts that require big up-front expenditures.

Earlier this week, Ford Motor Co., a longtime EDS customer, said it would also buy software from EDS's rival, IBM, and Dassault Systemes SA to manage product life cycle.

EDS says it expects full-year per-share earnings this year to come in between $1.80 and $2, with a revenue gain in the low to middle single digits. However, the services firm cautioned that those numbers don't factor in the possibility of war in Iraq, which could further weaken demand for EDS's services.