Embattled IT services provider Electronic Data Systems (EDS) on Wednesday reported a steep net loss for its first quarter of 2003, while revenue grew slightly.
EDS, the second largest provider of IT services behind IBM Corp., posted a net loss of US$126 million, or $0.26 per share, in the quarter ended March 31. This compared with net income of $354 million, or $0.72 per share, in 2002's first quarter. Total revenue rose 2 percent to $5.37 billion.
The company's bottom line was dragged down by a $334 million cumulative pre-tax loss associated with the mammoth, multi-year Navy Marine Corps Intranet (NMCI) project, which EDS won in October 2000. The deal was expect to be worth $6.9 billion to EDS over the life of the contract, the company said at the time. Also hurting the bottom line was a $48 million pre-tax charge related to the severance package of former Chief Executive Officer Dick Brown, who left on March 20.
Excluding those and other one-time items, first-quarter net income was $144 million, or $0.30 per share, a penny below consensus expectations from analysts polled by Thomson First Call.
Contract signings amounted to $3 billion, down from $7.2 billion in 2002's first quarter.
This was the first earnings report from the company's two new top executives: CEO and Chairman Michael Jordan and President and Chief Operating Officer Jeffrey Heller. They stepped in after Brown's departure.
EDS has been struggling for the past year on several fronts, and Brown's exit was seen as a necessary move to shake things up and get the company back on track. EDS' problems include sagging sales, a U.S. Securities and Exchange Commission (SEC) investigation, layoffs, losses of high profile deals and the bankruptcy of several big clients.
One of the company's darkest moments came when it posted an enormous shortfall in 2002's third quarter with earnings of $0.18 per share, versus the original expectation of $0.74 per share. Revenue for that quarter came in at $5.41 billion, versus the original forecast of between $5.8 billion and $5.9 billion. This shortfall was among the reasons the SEC cited for launching its probe.
Observers view these as critical times for EDS, in which it must pull itself out of its funk or risk seeing a continued erosion of its position, credibility and reputation in the market.
EDS reported its earnings after the close of the financial markets in New York. Its stock (EDS) closed down 3.71 percent to $17.64.