EDS 4Q Earnings Up 20 Percent

Electronic Data Systems Corp.

Plano, Texas-based EDS, the world's No. 2 computer services provider after IBM, also said it expected to see continued double-digit earnings growth in 2002, noting its resistance to the economic downturn because it benefits from cost-cutting efforts of other companies.

EDS said fourth-quarter earnings were $396 million, or 81 cents per diluted share, compared with $331 million, or 70 cents, a year earlier.

Including a one-time credit of $10 million in unused reserves from a 1999 restructuring plan, EDS said earnings rose 26 percent to $405 million, or 82 cents per diluted share, from $321 million, or 68 cents, in the year earlier period.

Wall Street estimates had ranged between 77 cents and 82 cents per share with an average of 79 cents, according to Thomson Financial/First Call.

Looking forward, EDS said it was comfortable with a Wall Street consensus of 65 cents per share in the current first quarter and $3.05 per share for the full year 2002.

"We continue to see an ability to increase our earnings per share on a double-digit basis throughout that period (2002)," Chief Financial Officer Jim Daley told reporters.

EDS said fourth-quarter revenues rose 14 percent to $5.9 billion from $5.2 billion a year earlier. The increase was 13 percent when adjusted to exclude the effects of currency exchange rates, acquisitions, divestitures and business with its biggest single customer, General Motors Corp.

Daley said EDS expected base organic revenue growth to continue at a rate between 13 percent and 16 percent.

Shares of EDS closed down $1.45, or 2.4 percent, at $59.00 on the New York Stock Exchange before the earnings news. The stock has gained about 5 percent in the past year and has outperformed the broad S&P 500 benchmark index by about 32 percent since February 2001.

Daley said EDS was resistant to the current recession because it focused on long-term service contracts and offered customers a way to cut their costs in tough times via outsourcing operation of their computer systems and data processing to EDS.

Instead of reducing business, Daley said the Sept. 11 attacks on the United States had created a long-term opportunity by fueling demand for new security-related services.

EDS said its fourth-quarter operating margin rose 90 basis points from a year earlier to 11.4 percent.

Fourth-quarter contract signings were $10.1 billion, down from $15.8 billion a year earlier, when the company won a record $6.9 billion contract to outfit the U.S. Navy and Marines with a new computer system.

EDS said its pipeline, or the business opportunities it was pursuing but has not yet won, included 97 potential contracts worth more than $250 million each. It did not provide a total value for the pipeline.

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