United bankruptcy weighs on EDS
Electronic Data Systems says its fourth-quarter earnings will drop 5 cents per share due to aircraft-lease deals with United Airlines.
EDS said it had an investment of about $40 million in the lease deals with United, whose parent company UAL filed for bankruptcy earlier in the day. United said it will write down the entire amount of the investment in the fourth quarter. EDS said it has no other significant business ties with United.
Analysts had expected EDS to earn 52 cents per share for the fourth quarter, according to research firm First Call.
EDS entered the lease deals with United in 1991 for tax purposes, according to a company representative. EDS received an investment tax credit at the inception of the lease and reduced taxes for items including aircraft depreciation.
The United leases aren't the first aircraft investments for EDS that have hit turbulence. In August, the company said it had $25 million worth of aircraft leases with US Airways, which also filed for bankruptcy.
The United bankruptcy comes amid a rough patch for EDS. The company's stock tanked this fall after it drastically reduced its third-quarter earnings forecast. EDS also is the subject of a Securities and Exchange Commission probe.