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Electronic Data Systems reported a large fourth quarter loss on Thursday as the company continues to deal with the multi-billion dollar money-loosing Navy contract and falling order books.
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| Consulting-Times E-zine
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EDS reported a net loss of $354 million, or 74 cents per share, after writing down the entire $559 million in deferred costs related to the Navy Marine Corps Intranet (NMCI) program, and recognizing $84 million of previously disclosed pre-tax restructuring charges and after-tax losses of $7 million from discontinued operations.
EDS signed $4.3 billion in contracts in the fourth quarter versus $8.1 billion a year ago. Signings for the full-year 2003 totaled $14 billion, versus $24.4 billion in 2002. Jordan said an expected uptick in overall IT services spending in the second half of 2004 and EDS' improving competitive position should provide EDS with sales momentum in the third and fourth quarters.
“We now have the resources, leadership and sales capabilities in place to re-establish EDS in the market. Our 2004 focus is squarely on growing the business,” said Jordan.
EDS said it is working closely with the Department of the Navy to stabilize the NMCI program. It said it has revised the NMCI schedule to contain capital and reduce risk and has reorganized and strengthened the account team, which now reports to EDS President and COO Jeff Heller.
EDS posted fourth quarter net income of $59 million, or 12 cents per share, excluding the write-down, restructuring charges and discontinued operations. Comparable fourth quarter 2002 net income was $194 million, excluding income from discontinued operations of $107 million and a restructuring credit of $3 million.
“We are continuing to put EDS' house in order,” said Chairman and CEO Mike Jordan. “Our fourth quarter results, excluding NMCI, met expectations. Operationally, we completed our management team and solidified our technology and marketing strategies.”
Total revenue was $5.76 billion, up 8 percent from $5.35 billion in the year-ago quarter, largely the result of favorable foreign exchange rates.
For full-year 2003, EDS posted a loss of $1.70 billion ($3.55 per share), versus 2002 earnings of $460 million, or 94 cents per share.
Full-year 2003 revenue reached $21.5 billion, up 7 percent versus $20.1 billion in 2002 (up 2 percent on an organic revenue basis).
EDS expects revenue of $21-$22 billion for 2004 with earnings per share of 50-60 cents, including NMCI; $1.00-$1.10 per share, excluding NMCI.
Revenue for A.T. Kearney for the quarter declined by 8 percent to $214 million from the fourth quarter in 2002, while operating income declined 89 percent to $3 million, reflecting continued market pricing pressures in high-value management consulting.
Core Results by Geography/Market Segment (excludes A.T. Kearney and UGS PLM Solutions):
Americas: Fourth quarter revenue in the Americas was $2.35 billion, down 4 percent from the same period last year, reflecting lower GM revenue, a divestiture and renegotiated contracts. Operating profit was $287 million, down 13 percent.
EMEA: Fourth quarter revenue was $1.50 billion, down 1 percent from the same period last year, as financial services growth was offset by client run-off. Operating profit declined 1 percent to $149 million, reflecting client run-off and the stabilization of key accounts.
Asia: Revenue for the quarter rose 8 percent to $298 million, year over year, driven by growth in the government sector. Operating profit dropped 26 percent to $24 million due to financial services program implementation costs.
U.S. Government: Revenue jumped 24 percent to $912 million for the fourth quarter, reflecting growth in the NMCI program and other defense-related contracts. Operating profit was $15 million, reflecting NMCI-related program costs (excludes impact of NMCI write-down).
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