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Tuesday, September 24, 2002 11:54:05 AM
RESEARCH ALERT-Merrill cuts EDS rating to sell
Tuesday September 24, 10:42 am ET
NEW YORK, Sept 24 (Reuters) - Merrill Lynch said on Tuesday it cut its stock rating for Electronic Data Systems Corp. (NYSE:EDS - News) to a "sell," saying it believes the computer services firm is facing a loss from its exposure to settle futures contracts.
Merrill said that EDS on Friday unwound obligations representing 3.7 million shares at a cash cost of $225 million that it had funded by issuing commercial paper.
"This move effectively eliminates EDS' free cash flow for '02, by our estimates," analyst Steve McClellan said in a statement.
McClellan said that having less cash could, in turn, impair EDS' ability to effectively compete for contracts, such as the large computer services contract currently up for grabs at financial services firm J.P Morgan Chase & Co. (NYSE:JPM - News). Such large contracts typically require significant upfront investments. McClellan also said EDS may have to refinance an $800 million convertible debt offering in the coming year.
Shares of EDS were off more than 30 percent, or $5.07, at $11.45 in early trade on the New York Stock Exchange.
http://biz.yahoo.com/rf/020924/tech_eds_research1_1.html
Tuesday September 24, 10:42 am ET
NEW YORK, Sept 24 (Reuters) - Merrill Lynch said on Tuesday it cut its stock rating for Electronic Data Systems Corp. (NYSE:EDS - News) to a "sell," saying it believes the computer services firm is facing a loss from its exposure to settle futures contracts.
Merrill said that EDS on Friday unwound obligations representing 3.7 million shares at a cash cost of $225 million that it had funded by issuing commercial paper.
"This move effectively eliminates EDS' free cash flow for '02, by our estimates," analyst Steve McClellan said in a statement.
McClellan said that having less cash could, in turn, impair EDS' ability to effectively compete for contracts, such as the large computer services contract currently up for grabs at financial services firm J.P Morgan Chase & Co. (NYSE:JPM - News). Such large contracts typically require significant upfront investments. McClellan also said EDS may have to refinance an $800 million convertible debt offering in the coming year.
Shares of EDS were off more than 30 percent, or $5.07, at $11.45 in early trade on the New York Stock Exchange.
http://biz.yahoo.com/rf/020924/tech_eds_research1_1.html
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