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EDS beats Street, affirms 2002 target
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October 24, 2001: 5:09 p.m. ET
IT services provider says it will not falter in a weakening economy.
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NEW YORK (CNNmoney) - Technology services provider EDS on Wednesday reported increases in its third-quarter sales and profit and said it expects to meet the Street's earnings estimates for 2002.
After the close of trading, the Plano, Texas-based company, which ranks second to IBM in information technology (IT) services worldwide, said it earned $334 million, or 69 cents per share, during the quarter ended Sept. 30.
That excludes acquisition-related charges and compares with a profit of $279 million, or 59 cents per share, a year earlier. The company's operating profit also was a penny more than the 68 cents per share Wall Street generally had expected, according to a survey of analysts conducted by First Call.
Including a one-time charge of $122 million, EDS said its third-quarter net profit was $212 million, or 44 cents per share, down from $279 million, or 59 cents per share, a year ago.
At $5.6 billion, EDS' third-quarter revenue rose 16.7 percent from $4.8 billion during the year-ago quarter.
Shares of EDS (EDS: Research, Estimates) closed 20 cents lower at $62 on the New York Stock Exchanges before the earnings news. The stock has gained about nine percent this year, outperforming the S&P 500 by more than 30 percent.
Looking ahead, EDS Chief Financial Officer Jim Daley said the company is likely to hit its earnings targets for 2002.
"Right now the Street is out there with a consensus view of $3.03, and we're comfortable with that position today," Daley said in a teleconference Wednesday evening.
EDS executives said their business is insulated from the impact of the Sept. 11 terrorist attacks on the United States, which many high-tech companies have blamed for quarterly earnings misses and lower future sales and profits.
Because its focus is on long-term services contracts that offer customers a way to cut their costs in tough economic times, Daley said EDS will be resistant to a general IT industry downturn.
In fact, he said that instead of resulting in weaker results, the Sept. 11 attacks had created a longer-term opportunity for EDS by sparking demand for new security-related services.
"We were immediately asked to create software in the airline reservation area, for example, that would assist the airlines in being able to look at passenger lists and compare those lists with names provided by various government agencies," he said.
IBM (IBM: Research, Estimates) also pointed to its services division, as well as other "annuity-like" businesses, as key to its meeting financial targets in the coming months when it reported its results earlier this month.
During the third quarter, EDS said new contract signings were up 10 percent at $6.8 billion, the 11th consecutive quarterly record. The company said its pipeline, or the business opportunities it was pursuing but has not yet won, included 88 potential contracts worth more than $250 million each. 
-- Reuters contributed to this report.
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