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EDS comfy with Q1, 2001 estimates

    A robust fourth quarter and year 2000 will carry over into 2001, Electronic Data Systems said Wednesday.

    "We're targeting to do better than we did last year," said Dick Brown, chairman and CEO. "That's how it works."

    Brown spoke during a Wednesday afternoon conference call with analysts, following the release of fourth-quarter results for the technology services provider. Company executives said they're comfortable with analyst forecasts for the first quarter and 2001.

    First Call Corp. consensus predicts earnings of 56 cents per share in EDS' first quarter and $2.63 per share for the full year.

    Shares of EDS traded at $61.70 in after-hours activity on the Island ECN, following the earnings report. EDS fell $1.65 to $56.90 in Wednesday's regular trading ahead of the release of fourth-quarter earnings.

    EDS' 2001 revenue, excluding business from General Motors (NYSE: GM), should meet or outpace expected market growth of 13 percent to 16 percent, said Jim Daley, chief financial officer of EDS. Non-GM revenue growth should improve throughout the year, he added.

    The company's 2001 outlook looks especially strong compared to other technology services companies such as Computer Sciences (NYSE: CSC), which earlier this week said it could earn less than analysts were expecting in the current quarter. "EDS had a superb quarter," said Gregory Gieber, analyst with A.G. Edwards. "This is our first field day for technology analysts in awhile."

    The U.S. economic slowdown isn't hurting EDS, Brown said.

    "We found the impact to be relatively neutral...but trending toward the positive," Brown told analysts. "I don't think this is going to impact us one bit on the negative side."

    That relatively upbeat outlook comes after a better-than-expected fourth quarter. EDS reported fourth-quarter net income of roughly $333 million, or 70 cents per share, excluding special charges. First Call's survey of 16 analysts predicted a profit of 68 cents per share for the EDS' quarter ended Dec. 31.

    Including all charges, EDS earned $321.4 million, or 68 cents per share in the fourth quarter.

    Fourth-quarter revenue increased 5.6 percent year-over-year to $5.2 billion. First Call consensus predicted revenue of $5.06 billion.

    Revenue excluding business from General Motors (NYSE: GM) increased 9 percent year-over-year.

    Operating margin increased to 10.5 percent from 9.6 percent in the third quarter. "EDS was a turnaround story, and now it's all come together," Gieber said. "Brown got the company better focused on operations...EDS is going in and focusing a lot on their ability to take costs out of areas."

    The company in the fourth quarter won contracts worth a total of $15.8 billion, up 41 percent from the comparable period a year ago. Contract signings rose 33 percent in the United States, 141 percent in Europe and 295 percent in the Asia Pacific region.

    Economic slowdowns can benefit EDS as corporate customers look for ways to cut costs, executives and analysts said.

    "We see a more defensive utilization of EDS' capabilities," said Brown, citing increased demand for the company's systems integration, ability to connect legacy systems, managed storage and other services designed to cut corporate expenses.

    For 2000, EDS earned $2.29 per share on revenue of $19.2 billion.

    "They've got more growth there," Gieber said. "I expect this company to repeat what they did in 2000 for EPS growth.">