EDS Reports 2006 First Quarter Results

Published May 7th, 2006 - 01:34 GMT

Global IT services giant Electronic Data Systems (EDS) has reported a net income of US$ 24 million or five cents per share for this year’s first quarter, as compared to a net income of US$ 4 million or one cent per share, in last year’s first quarter.

Similarly, EDS’ pro forma first quarter net income stood at US$ 69 million or 13 cents per share, as against the first quarter 2005 pro forma net income of US$ 42 million or eight cents per share. EDS’s contracts also rose to US$ 10 billion in the first quarter, up 45 percent from US$ 6.9 billion in the year-ago quarter.

Pro forma first quarter 2006 net income and EPS (earnings per share) exclude after-tax losses of US$ 9 million (one cent per share) for discontinued operations; and US$ 53 million pre-tax (seven cents per share) for expensing of stock options and performance-based restricted stock units related to continuing operations.

“EDS posted solid financial performance in the first quarter and continued to make progress on investment initiatives, while securing two landmark contracts for the company,” said Michael Jordan, EDS Chairman and Chief Executive Officer.

As previously announced, EDS signed significant first quarter contract renewals and/or extensions with General Motors for US$ 3.6 billion, and the US Department of the Navy for US$ 3.9 billion. Other first quarter contract highlights include approximately US$ 400 million in new HR outsourcing contracts, including a major end-to-end HR services contract for Excellerate HRO.

EDS started the second quarter with strong momentum in contract signings, recently announcing a US$ 1.7 billion IT infrastructure services agreement with Kraft Foods Inc. EDS posted first quarter revenue of US$ 5.08 billion, up 10 percent on an organic basis (which excludes the impact of currency fluctuations, acquisitions and divestitures) from US$ 4.74 billion in the year-ago quarter.

Free cash flow was an outflow of US$ 38 million in the first quarter, an improvement of US$ 44 million versus the year-ago period. EDS’ operating margin for the first quarter was 1.5 percent. Pro forma operating margin, excluding the items referred to above, was 2.6 percent, compared to 1.4 percent in the year-ago quarter.

“We continue to improve our performance on major contracts, including NMCI (Navy Marine Corp Intranet), and increase our efficiency around service delivery,” said Ron Vargo, interim co-Chief Financial Officer and Treasurer. “The acceleration of our investment initiatives, as we move to the deployment phase of our programme, gives us increased confidence in the free cash flow and operating margin reflected in our full-year guidance and builds conviction around our longer-term financial goals,” he added.

In 2005, EDS and Mubadala Development Company (MDC) entered into a joint venture and formed Injazat Data Systems. Injazat provides IT outsourcing services to the government, oil and gas, utilities, financial services, transportation, telecom and healthcare sectors, and is quickly becoming the regional leader in the IT and business process outsourcing market. With Injazat, EDS has now reinforced its market position in the fast-growing Middle East IT market.

EDS (NYSE: EDS) is a leading global technology services company delivering business solutions to its clients. EDS founded the information technology outsourcing industry more than 40 years ago. Today, EDS delivers a broad portfolio of information technology and business process outsourcing services to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries and to governments around the world.  Learn more at eds.com.
About Mubadala Development Company:
Mubadala Development Company is a wholly owned investment vehicle of the Government of the Emirate of Abu Dhabi in the United Arab Emirates. It was established in October 2002 as a Public Joint Stock Company, with the mandate for establishing new companies and acquiring strategic holdings in existing companies, either in the UAE or abroad. Its investments cover a wide range of strategic sectors including energy, utilities, real estate, public-private partnerships, basic industries and services. Injazat Data Systems is a joint venture between Mubadala and EDS.

About Injazat Data Systems LLC:

Established in the 1st Quarter of 2005, Injazat Data Systems is an Information Technology and Business Services company that offers a wide range of outsourcing services. It is focused on providing IT outsourcing services to the oil & gas, utilities, financial services, government, transportation, telecom and healthcare sectors. Injazat is a joint venture of Mubadala Development Company and Electronic Data Systems (EDS).

Injazat aims to become the premier information technology and business process outsourcing services provider in the region. Growth is driven through Mubadala’s knowledge of the Middle East business environment plus the delivery capabilities of EDS – creating a local company with the experience of a global player.

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