Electronic Data Systems ( EDS) delivered a late hit to battered investors on Wednesday. After leaving investors guessing on the sidelines for weeks, EDS finally knocked them down Wednesday afternoon with a
dismal earnings report. The company's troubled Navy contract cost it $334 million in the quarter, triggering an unexpected loss for the period. Even without the Navy setback, the company still missed Wall Street expectations by a penny. Moreover, EDS was in no position to offer any kind of earnings guidance for the full year. EDS did, however, predict that second-quarter earnings would come in at 32 cents to 38 cents a share -- at best, a penny lower than current Wall Street estimates. In the meantime, CEO Michael Jordan asked investors to "just hang with" the company a few more weeks until it can finalize full-year guidance. He also pledged to make improvements in the company's operations. "While no one likes reporting a loss, we believe we have addressed our major exposures," Jordan said. "We recognize we have a lot of work to do." But, he added, "EDS's priorities remain cash flow, earnings and growth -- in that order." During the latest quarter, EDS generated $122 million in free cash flow, reversing a year-ago deficit but still coming up short of what even some bearish analysts were expecting. Losses from the Navy contract -- now expected to be a cash drain until the middle of next year -- pushed the company to an overall quarterly loss of $126 million or 26 cents a share. Excluding the Navy loss, the company reported a quarterly profit of 30 cents a share that just missed consensus estimates. Although EDS did boost quarterly revenues slightly with help from foreign currency rates -- surprising some who were bracing for a double-digit decline -- the company's business growth continued to slow. In the latest quarter, EDS signed only $3 billion worth of new contracts, down sharply from $7.2 billion a year earlier. Profit margins also tumbled, sinking from 11.2% to 5.1% in the quarter. But EDS insisted that at least some of the slowdown was intentional, blaming it on "management's decision not to pursue certain business and an increasingly competitive sales environment." Still, the company was cautiously upbeat about its future. "We will remain disciplined in pursuing the right business opportunities and not sacrificing the bottom line for top-line growth," the company said. "We can focus on growing our core outsourcing business in a long-term growth industry where we are one of the two global players." EDS shares sank 3.7% to $17.64 ahead of the earnings report. The stock has lost two-thirds of its value since the company began weathering massive setbacks under the leadership of former CEO Dick Brown last year.