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Tech Industry

EDS target of financial probe

The Securities and Exchange Commission is investigating the computer services company's recent earnings warning and its policy on employee stock options.

Federal regulators have launched an informal inquiry into EDS, the computer services giant announced Tuesday.

The Securities and Exchange Commission has asked EDS to voluntarily cooperate with its inquiry, the company said. It wants information relating to the computer service company's efforts to reduce its costs when employees exercise their stock options, a practice known as hedging stocks; it has also requested information about the events leading up to the company's recent earnings warning.

The action marks the latest in a string of misfortunes that have hit the computer services company, which is suffering stalling sales.

In mid-September, the company warned its third-quarter earnings would be around 12 cents to 15 cents per share, a dramatic reduction from Wall Street's expectations of 74 cents per share. In addition, EDS last month acknowledged that its stock-hedging efforts backfired and cost the company more than $200 million.

EDS said it is cooperating with the regulators and is confident the inquiry will absolve the company of any wrongdoing.

Shares of EDS were down $1.59, or about 10.5 percent, to end Wednesday at $13.50.