Thursday, 24 April 2008

EDS Q1 exceeds expectations

You can view EDS Q1 results in a number of contrasting ways:

POOR - splitting out both currency fluctuations and acquisitions, revenues decreased by 2% (to $5.37b). Net income in Q1 reduced from $165m to $63m as Q1 07 had included an exceptional £100m from the Verizon contract termination. The exceeded previous guidance and concensus analyst expectations.

GOOD – revenues from EMEA increased by a slightly better than average market growth 6% to $1.73b. Bill Thomas, who heads EDS EMEA, must be pretty pleased with this performance when compared with a 9% decline in revenues from EDS America (to $2.45b) However EMEA profits fell 7% to $182m – “impacted by price adjustments and investments”

EXCELLENT – EDS signed $5.6b in new contracts in Q1 08 – up 66% on Q1 07. This not only included the Shell (see HotViews 31st March 08) and Singapore megadeals (ie a megadeal is worth more than $1b) but a further 10 deals worth in excess of $100m.

EDS has maintained its guidance for FY08 – which in the circumstances is pretty good.

EDS also reported another 2000 offshore (what EDS calls Bestshore) employees in Q1 taking the total to 43,000. They aim for 49,000 by end of 2008 and 60,000 over ‘next 2-3 years’.

ITO (55%) and BPO (15%) make up the lion’s share of EDS’ revenue. So EDS has a large percentage of its revenues from contracted revenues stretching years into the future. Also it supports client’s core systems – systems which have to be maintained come what may. It may be ‘Boring’ but this is what makes companies like EDS and CSC such good ‘havens in the storm’.

Footnote - EDS shares closed Thursday up 8% at $19.91.

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