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EDS First Quarter Profits Soar, But Outlook Disappoints

EDS said the fivefold increase in profits was due in part to its receiving payments from some outsourcing contracts earlier than planned.
Outsourcer EDS on Thursday reported a surge in first quarter profits, but warned that future earnings may not meet analysts' expectations.

For the three months ended March 31, the company said revenue climbed 3% year-over-year to $5.2 billion. For the quarter, EDS posted adjusted net income of $165 million, or 31 cents per share, compared with adjusted net income of $33 million, or 6 cents per share, a year ago.

EDS said the fivefold increase in profits was due in part to its receiving payments from some outsourcing contracts earlier than planned. As a result, the company issued second quarter guidance below what most Wall Street analysts were predicting.

EDS said it expects per-share earnings in the second quarter of between 22 cents and 27 cents. Analysts surveyed by Thomson Financial were, on average, expecting the company to report second quarter EPS of 33 cents.

EDS shares were off almost 6% on the news in late day trading Friday.

The company said new contract signings in the first quarter totaled $3.4 billion, compared with $10 billion during the same period a year ago, when it secured a $3.6 billion deal with General Motors and a $3.9 billion deal with the U.S. Navy.

EDS officials said a decline in the outsourcing market overall contributed to the company's fall-off in deals. "Despite what appear to be softer market conditions, EDS' signings were solid," said chief operating officer Ron Rittenmeyer, in a statement.

For the rest of 2007, EDS said it expects full year revenue to come in between $22 billion and $22.5 billion on earnings per share of $1.55 to $1.60.