Affiliated Computer Earnings In Line

Updated from 4:48 p.m. EDT

SAN FRANCISCO -- Technology services giant Affiliated Computer Services (ACS Quote) said fourth-quarter profit took a hit after the company lost a project with the Department of Education.

ACS said Tuesday that net income tumbled to $37.6 million, or 37 cents a share, from $86.1 million, or 72 cents a share a year earlier.

But excluding certain items unrelated to the company's operations, ACS earned 88 cents a share, matching analysts' average estimate, according to Thomson First Call.

These items included costs related to a proposed buyout, a Securities and Exchange Commission investigation into pricing of stock options and the closing of the software development project with the Department of Education.

Revenue rose 10% to $1.52 billion, slightly ahead of forecasts, on strong growth in the company's base of government clients. Government agencies accounted for 42% of revenue, with the remainder coming from commercial clients.

For the full-year, the rate of contact renewals jumped to 94% from 85%.

ACS generated $343 million from operations, more than double the amount last year, thanks largely to faster collection of accounts receivable.

"Despite non-operational distractions, we generated record company revenues for the year, significantly improved our client renewal rates, and enjoyed outstanding cash flow results," Chief Executive Lynn Blodgett said in a statement.

After the earnings release, shares fell 95 cents to $50.

The news comes against the backdrop of ACS' increasingly uncertain buyout that has thrown the company's shares into slump.