EDS Finally Owns Up to Bleak Outlook

Ultimately, Djurdjevic expects a stronger company to scoop up EDS on the cheap.

The buyout might be "like swallowing a poison pill," he said. "But if it doesn't kill you, it might cure you. ... Somebody could buy the company, dump all the poison out and keep the good stuff -- because there is some good stuff at EDS."

Still, Djurdjevic doesn't expect EDS to become an attractive target until its stock falls to $12 or $13 a share.

Meanwhile, Gimme Credit analyst Carol Levenson is warning about potential downside in the company's bonds as well. Levenson did concede that EDS could soon take steps that would "bolster the company's financial strength at a time when its business prospects and cash flow generation seem fraught with uncertainty." Specifically, EDS may cut its annual dividend by two-thirds to 20 cents a share and sell $1 billion worth of new equity or equity-linked securities. Levenson applauded EDS' sudden focus on its balance sheet -- but also seemed to question the company's past dismissal of the issues now at center stage.

Even in its latest earnings release and conference call, she noted, EDS downplayed the gravity of the current situation.

"As we've noted before, some of the more ... reticent ... companies we follow tend to accentuate the positive in their earnings releases, only to lay out the unvarnished and often sobering facts in their subsequent filings. EDS," Levenson declared, "is a master of this practice."

« Previous Page

1 2 3

Next Page »