EDS Posts Q2 Pro Forma Loss of $16 Million

EDS posted strong numbers in the communications, government and retail verticals, but says it experienced ongoing declines from car-maker GM. In addition, EDS signed $4 billion in contracts in its second quarter, up 25 percent from $3.2 billion a year ago, including an eight-year, $1.1 billion managed network-services agreement with Bank of America, a spokesman says.

"Our ongoing business is now fully competitive, with increasing sales momentum reflected in our results as we lay the groundwork for further gains in 2005. At the same time, we continue to be burdened by the cleanup of past problem contracts," said chairman and CEO Mike Jordan in a statement.

It has been a roller-coaster ride for EDS over the past couple of months. It gained $404 million after taxes, or 81 cents per share, for the $2.05 billion sale of its PLM software unit, but took a second-quarter hit of $135 million, or 17 cents per share, to kill a contract it's publicly calling "the other commercial contract" (published reports are saying it was with Dow Chemical) and took another charge of $40 million, or 6 cents per share, for restructuring costs. Including such one-times gains and losses, the company earned $270 million, or 54 cents per share, for the three months.

EDS was understandably peeved when Moody's trimmed it rating on the integrator's senior unsecured notes from Baa3 to Ba1, which is below investment grade. It issued a statement that said, in part, "We have taken a series of aggressive steps to support our investment-grade rating. Given our progress and sound financial footing, we are in strong disagreement with Moody's decision. EDS has significantly reinforced its financial foundation, improved its competitiveness and fully expects to meet its guidance on second-quarter 2004 results."

However, AP reported that Rod Bourgeois, an analyst for Sanford C. Bernstein and Co., told clients it will take EDS some time to reverse the downgrade and that the "stigma" could scare away clients.