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Tech Industry

Services a bright spot in down market

Struggling IT services companies Electronic Data Services and Computer Sciences announce separate contract agreements amid tough times.

Struggling IT services companies Electronic Data Services and Computer Sciences announced separate contract agreements on Tuesday.

EDS said it penned deals worth $240 million with two existing clients, timber firm Weyerhaeuser and Australian power utility Integral Energy. Computer Sciences said it landed a $23 million contract with the U.S. Missile Defense Agency to help develop advanced capabilities for the ballistic missile defense system.

Plano, Texas-based EDS did not disclose terms of either of its two contracts. The company said it will provide IT services to integrate Weyerhaeuser's computer systems with those of Willamette Industries, a recent Weyerhaeuser acquisition.

EDS will deliver network, desktop and server management, and mainframe and helpdesk services to former Willamette sites across the United States. EDS will continue providing the same services for Weyerhaeuser throughout North America. The deal builds on agreements Weyerhaeuser and EDS announced in December 2000 and September 2002.

Integral Energy renewed its technology outsourcing agreement for the next two years, EDS said. The original contract with the power company was signed in 1996.

El Segundo, Calif.-based Computer Sciences said its yearlong contract has the option to be extended each year for a total of three years; with the extension, the deal is worth more than $23 million. An additional six-year term--potentially worth more than $36 million--may be awarded on a performance basis, the company said.

Under the contract, Computer Sciences will provide technical program management, systems integration and scientific services to assist the agency's Advanced Systems Directorate. Computer Sciences will help develop technologies to improve sensor discrimination, battle management and other missile defense capabilities.

Both EDS and Computer Sciences have suffered amid an IT spending slump. EDS' revenue for the past three quarters rose 4 percent, while Computer Science's sales for the past two quarters increased less than 1 percent.

EDS has weathered other problems. Monday, the company said that fourth-quarter earnings would fall by 5 cents per share because of aircraft lease deals with United Airlines, whose parent company UAL filed for bankruptcy.

Shares in EDS suffered this fall after the company offered third-quarter earnings guidance well below expectations, with third-quarter results including write-downs associated with the US Airways and WorldCom bankruptcies. In October, EDS said it was the subject of an SEC probe.