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Electronic Data Net Falls 13%; Sales Miss Estimates
Electronic Data Systems Corp., the second-biggest computer-services provider, reported fourth- quarter profit and gave a forecast for this period that missed estimates after sales fell in North America. The shares slumped 4.2 percent.

Net income declined to $189 million, or 36 cents a share, from $217 million, or 40 cents, a year earlier, the Plano, Texas-based company said today in a statement. Revenue gained 2.2 percent to $5.83 billion, missing analysts' estimates.

Sales fell 8 percent in North and South America after Verizon Communications Inc. ended a contract last year for Electronic Data to manage its computer systems. Chief Executive Officer Ronald Rittenmeyer is firing workers and shifting jobs to lower-cost countries such as India to curb expenses and fight larger rival International Business Machines Corp.

``These results aren't something to get the stock moving,'' said Cynthia Houlton, an analyst at RBC Capital Markets in New York. She rates the shares ``sector perform'' and doesn't own them.

Excluding costs such as an early retirement plan, profit rose to 55 cents a share, missing the average estimate of 57 cents in a survey of analysts by Bloomberg. Analysts predicted sales of $5.88 billion.

Electronic Data fell 82 cents to $18.79 in extended trading. The stock closed at $19.61 on the New York Stock Exchange and has declined 5.4 percent this year.

Annual Forecast

For the year, Electronic Data said revenue will rise about 2 percent, indicating sales of $22.6 billion. Profit, excluding some items, will fall to $1.35 a share, reiterating a forecast given in November. Analysts estimated revenue of $22.7 billion and earnings of $1.53 a share.

``We clearly are not satisfied with the pace of improvement,'' said Rittenmeyer, 60.

Earnings in the first quarter will fall to about 5 cents a share, including costs of 8 cents for job cuts, Electronic Data said. That compares with the average estimate of 25 cents among analysts.

Electronic Data said it signed $6.1 billion of contracts in the fourth quarter, down from $7.6 billion a year earlier. Revenue in Europe and the Middle East increased 3 percent to $1.77 billion, and sales in Asia rose 16 percent to $478 million.

``At this point, from a macroeconomic standpoint, we haven't seen anything that puts us in a serious state of concern,'' Rittenmeyer said.

Eliminating Jobs

Rittenmeyer, who replaced Michael Jordan in September, plans to cut costs and eliminate jobs in the U.S. this year. Electronic Data said in November that about 2,500 of the 12,000 U.S. workers offered early retirement last year will accept the proposal. The reductions may help save about $125 million a year.

Electronic Data said that the cuts also will result in a one-time expense of as much as $250 million this year. The company had 139,000 employees at the end of last quarter, with 41,000 in lower-cost locations such as India.

The contract with Verizon Communications, the second- biggest U.S. telephone company, was part of a $12.4 billion agreement signed in 1999 with WorldCom Inc., which was renamed MCI after bankruptcy and later bought by Verizon.

Electronic Data won a $715 million agreement with drugmaker Bristol-Myers Squibb Co. in December to help manage information technology. Last month, the company renewed a 582 million euro ($852 million) contract to manage communications technology for the Flemish government.

To bolster growth, Electronic Data said in November it would pay $420 million for Saber Holdings Inc. to add software for government operations and elections.

In December, Electronic Data said its board approved stock buybacks of as much as $1 billion. Rittenmeyer was also elected chairman that month.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aNUyqfsd76vQ&refer=us