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EDS Posts Another Stellar Quarter

The IT services bellwether showcases the advantages it enjoys in a slumping, fear-driven economy, reporting growing revenue and record contract signings.
EDS continues to defy the economy. Despite the fact that many of its customers undoubtedly are looking to slash costs amid slumping sales, the IT services firm Wednesday reported that contract signings reached record levels for the 11th consecutive quarter, helping drive third-quarter revenue up 16% and provide continued optimism for future quarters.

For the quarter ended Sept. 30, EDS posted a profit of $212 million, or 44 cents a share, on revenue of $5.6 billion. That compares with a profit of $279 million, or 59 cents a share, on revenue of $4.8 billion last year. During a conference call that clearly impressed analysts, CEO Dick Brown emphasized that the numbers would have been even better if not for the events of Sept. 11. Not only did the terrorist attacks cause sales and project delays, but they also forced EDS to demonstrate flexibility: The company extended by eight months the payment terms for its customers in the beleaguered airline industry.

Brown indicated that the events of Sept. 11 have also cemented the company's reputation as an indispensable resource for protecting its customers' mission-critical systems. "Businesses are realizing that investing in contingency planning is a necessity, not a luxury," he said. EDS has received a growing number of inquiries--from higher levels within companies--about redesigning entire IT architectures to provide stronger data security and business continuity, Brown said. "These requests are no longer coming from middle managers, they're coming from CXOs."

Nearly every part of EDS's business looks healthy. Revenue was up 21% for the company's strategic infrastructure business and 19% for its business-process management unit. Its E Solutions segment grew 45%, helping consulting revenue grow by 13% overall, and life-cycle management revenue was up 63%, buoyed by the acquisition of Structural Dynamics Research Corp. Geographically, Latin America led the charge, with revenue there up 24%, while Europe, the Middle East, and Africa grew by a combined 23%. The only areas of concern: Management consulting reflected market trends, dropping 8%, and revenue from General Motors Corp., EDS's largest customer, was down 10%. GM accounted for 14% of EDS's total revenue.