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Electronic Data Systems tripled its net income in its second quarter from a year ago thanks to the sale of its PLM software unit.
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| Consulting-Times E-zine
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Excluding one-time gains and losses, including the sale of its software business, EDS said it would have lost $16 million, or 3 cents per share, in line with analysts’ forecast.
Slightly ahead of analysts' revenue forecast of $5.17 billion, revenue for the quarter rose to $5.24 billion from $5.06 billion a year earlier.
EDS, said it earned $270 million, or 54 cents per share, in the second quarter, compared to $88 million, or 18 cents per share, a year earlier.
Net income was affected by several items, notably an 81-cent-a-share gain on the sale of UGS PLM Solutions and a 17-cent charge on a money-losing contract that the company was finally able to close out. EDS has referred to the deal in recent years only as its "other commercial contract." EDS said it paid $135m to terminate the contract.
"EDS remains a tale of two cities," said Chairman and CEO Mike Jordan. "Our ongoing business is now fully competitive, with increasing sales momentum reflected in our results as we lay the groundwork for further gains in 2005.
"At the same time, we continue to be burdened by the cleanup of past problem contracts, as exhibited by our lower cash flow guidance on Navy and the charge this quarter to terminate the company's 'other commercial contract’."
EDS said it signed $4 billion in contracts in the second quarter, up 25 percent from $3.2 billion a year ago, reflecting sales growth from existing accounts and strong renewals. Signings also continued to be strong for contracts under $250 million in total value.
EDS affirmed its outlook, issued earlier this month, calling for 2004 earnings of 20 cents to 30 cents per share on revenue of $20 billion to $21 billion. The company expects free cash flow of $200 million to $300 million.
A.T. Kearney’s revenue for the quarter was $210 million, down 1 percent versus the same period last year, while operating profit was $3 million. EDS said the "high-end management and technology consulting services market continues to stabilize. "
A day prior to releasing its quarterly results EDS’ board voted to cut the company's quarterly dividend to 5 cents from 15 cents, which it suggested in May it might do as part of a broader reshaping of its balance sheet. The cut will save EDS about $50m a quarter. The company said Wednesday it expects to finish the year with cash equal to its debt.
In trading before release of the financial results, EDS shares fell 3 cents to close at $17.27 on the New York Stock Exchange. They gained 53 cents, or 3 percent, in extended trading.
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