Board-Ansicht
Mix-Ansicht- US Produktivitäts-Wunder: EDS kann 2700 MA von ihren Qualen befreien - kingsolomon, 20.06.2003, 18:37
US Produktivitäts-Wunder: EDS kann 2700 MA von ihren Qualen befreien
-->EDS cuts 2,700 jobs; new CEO refocuses on services
6/18/2003 4:51
By Caroline Humer
NEW YORK, June 18 (Reuters) - Electronic Data Systems Corp. (EDS) on Wednesday said it will cut 2 percent of its work force and sell assets as new management refocuses the embattled computer services company on managing technology for clients.
EDS shares rose nearly 8 percent as investors took heart from newly appointed Chief Executive Michael Jordan's efforts to tackle the company's woes. A sharp decline in new services deals, mounting debt and a Securities and Exchange Commission inquiry have rattled investors.
The good cheer lasted even as EDS told Wall Street analystsin New York that profits for the second half of the year would fall below analyst expectations. Revenue, however, would be in line with analyst hopes and results for the current quarter will be in line with forecasts, it said.
"The perception that EDS is not going to be here in the long term. It ain't true," Jordan said at a meeting with analysts."Today our intention is to kill that issue."
EDS, second only to International Business Machines Corp. (IBM) in computer services consulting, said it would cut about 2,700 employees and plans to take a second-quarter charge of $425 million to $475 million to cover the costs.
The company did not specify what assets it would sell.
"A lot of people were concerned that maybe this analyst day would provide... new negative issues such as more problem contracts, and that didn't happen," said Cynthia Houlton, an analyst for RBC Capital Markets who expects the stock to underperform the market.
The job cuts are the latest round EDS has been forced to take in recent quarters as its blue-chip customer base has slashed technology spending and some big airline and telephone customers have sought bankruptcy protection.
EDS, which is based in Plano, Texas, said it expects to save $230 million before taxes from the cuts and plans to reduce costs further by moving more workers offshore. Many of the job cuts will be in Europe, where EDS said costs are high.
EDS also said on Jan. 1 it would change to a cumulative basis how it accounts for revenues and earnings for long-term services contracts in which it takes over managing clients' computer operations and networks.
Chief Financial Officer Robert Swan said that could result in a write-down of $600 million to $1.8 billion. EDS said the full costs of the accounting change are not known.
Swan is one of three new managers at EDS. The company replaced its CFO in February, and the CEO and chief operating officer were replaced in March. Wednesday's meeting marked the first time the team met with a group of major investors.
KILL VIABILITY ISSUE
EDS said it expects to raise about $250 million in cash from asset sales this year, and it sees ending the year with $1.4 billion to $1.7 billion in cash on hand.
Free cash flow -- needed by the company to cover up-front expenses on any new contracts it signs -- should be $400 million to $600 million this year, EDS said. That's down from a previous outlook for a range of $700 million to $900 million.
EDS, which had declined to comment on its financial outlook since Jordan arrived in March, said it expects second-half earnings of 70 cents to 80 cents per share, excluding items, on revenue of about $11 billion.
Analysts had expected earnings of 83 cents for the second half, according to Thomson First Call.
"Part of the reason that the stock is strong is people have speculated that the company might have to cut its guidance pretty substantially, and they did not," said Natalie Walrond, an analyst for Pacific Growth Equities. She rates the stock"underweight."
EDS sees second-quarter profits of 33 cents to 38 cents per share, excluding restructuring charges and asset write-offs. Revenues will range from $5.4 billion to $5.6 billion. That's above the 24 cents on revenue of $5.3 billion analysts expected.
For 2004, EDS said it sees revenue of $20 billion to $21 billion and free cash flow of $800 million to $1 billion, excluding payments relating to restructuring charges and the impact of changing its accounting methods and selling assets.
The SEC is looking at EDS' use of a stock-hedging strategy and events related to its September profit warning. In May it included disclosures over a big Navy contract to its probe.
Shares of EDS gained $1.70, or 7.6 percent, to $24.20 on the New York Stock Exchange. (Additional reporting By Kenneth Li)
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