EDS Reports Net Loss; Management Says Changes on Target

By Carol Ellison  |  Print this article Print


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EDS ends a year of turnover and turmoil. CEO Mike Jordan says 4th quarter "met expectations...we are continuing to put EDS' house in order."

EDS yesterday reported a fourth quarter net loss of $354 million, or 74 cents per share, after taking a $559 million charge in deferred costs from the Navy Marine Corps Intranet (NMCI) program.

EDS said it is working closely with the Department of the Navy to stabilize the NMCI program. In October, the company announced it would expand the financing facility associated with the NMCI contract from $600 million to $900 million, extending it from 2005 to 2007 to scrutinize receivables. EDS has been under contract with the Navy Marine Corps since 2001. It now forecasts the NMCI contract will generate $800 million to $1 billion in "free cash flow" through 2007.

"To achieve this goal, EDS is working with the Navy on a more controlled rollout," according to the company's earnings announcement.

"The revised deployment schedule and revenue assumptions required the write-down of $559 million in deferred costs in the fourth quarter," the statement went on to say. "EDS noted its negotiations with the Navy for additional services and cost recoveries are not reflected in the current forecast. "

Turnover and turmoil at EDS

NMCI is just the latest in a recent history of woes at EDS that precipitated CEO Richard Brown's departure last March. Brown stepped down in the wake of a major earnings disappointment in which earnings came in 80 percent under estimates only one month after Brown assured analysts the company was on target. That year also saw the exodus of major clients WorldCom and United Airlines and an overall erosion in its services contract, much it going to IBM Global Services.

Fix-it man Chairman and CEO Mike Jordan, put a positive spin on yesterday's news, saying "we are continuing to put EDS' house in order. Our fourth quarter results, excluding NMCI, met expectations. Operationally, we completed our management team and solidified our technology and marketing strategies. "

"We have changed our approach to the NMCI program and have developed a more efficient and predictable rollout schedule with our client," he added. "This enables effective use of capital and supports the long-term viability of the account. The revised deployment schedule and revenue assumptions required the write-down of deferred costs in the fourth quarter."

Click here to read eWEEK's report on why eyes are watching the NMCI project.

Carol Ellison is editor of The Ziff Davis Channel Zone. Write to her at carol_ellison@ziffdavis.com. Got an opinion about what's happening at EDS or the NMCI program? Tell us about it.

Carol Ellison is editor of eWEEK.com's Mobile & Wireless Topic Center. She has authored whitepapers on wireless computing (two on network security–,Securing Wi-Fi Wireless Networks with Today's Technologies, Wi-Fi Protected Access: Strong, Standards-based Interoperable Security for Today's Wi-Fi Networks, and Wi-Fi Public Access: Enabling the future with public wireless networks.

Ms. Ellison served in senior and executive editorial positions for Ziff Davis Media and CMP Media. As an executive editor at Ziff Davis Media, she launched the networking track of The IT Insider Series, a newsletter/conference/Web site offering targeted to chief information officers and corporate directors of information technology. As senior editor at CMP Media's VARBusiness, she launched the Web site, VARBusiness University, an online professional resource center for value-added resellers of information technology.

Ms. Ellison has chaired numerous industry panels and has been quoted as a networking and educational technology expert in The New York Times, Newsday, The Los Angeles Times and The Wall Street Journal, National Public Radio's All Things Considered, CNN Headline News, WNBC and CNN/FN, as well as local and regional Comcast and Cablevision reports. Her articles have appeared in most major hi-tech publications and numerous newspapers and magazines, including The Washington Post and The Christian Science Monitor.

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