Standard & Poor's, which earlier this month warned it was reviewing Electronic Data Systems ( EDS) for a possible debt downgrade, now says that downgrade might be more severe than originally believed. The ratings service cited EDS' weak operational performance.

EDS is a consulting, outsourcing and Internet commerce company that lost $126 million in the first quarter. S&P has put EDS's A-2 short-term corporate credit and commercial paper ratings on CreditWatch with negative implications, the first step before a full-blown downgrade.

S & P said: the status now means that long-term ratings might be lowered two notches to BBB from A-, rather than one notch to BBB+ as previously expected. EDS has about $5.4 billion in total rated debt.

S & P cited persistent weak operational performance in each of EDS's major lines of business. The ratings service also said EDS's in-house review, which is not expected to be completed until June, could affect 2003's earnings and cash flow outlook. "Although management's targets include improved competitiveness, renewed growth, and a strengthened balance sheet, the costs, execution risks, and change to the business profile arising from the strategic review are unclear at this point."

On May 8, S & P put EDS' long-term rating on review for downgrade.

Shares of Plano, Texas-based EDS were recently at $18.37, unchanged, in late afternoon trading.

The ratings service said it will meet with EDS' management to assess balance sheet expectations and the company's upcoming performance.

More from Stocks

Kroger CEO: Even in the Age of Amazon, Physical Stores Will Still Be Important

Kroger CEO: Even in the Age of Amazon, Physical Stores Will Still Be Important

Video: As Trade Worries Subside, Expect a 'Relief Rally' in Stocks

Video: As Trade Worries Subside, Expect a 'Relief Rally' in Stocks

Stocks Trade Mixed Amid Progress on U.S.-China Trade; Dow Turns Lower

Stocks Trade Mixed Amid Progress on U.S.-China Trade; Dow Turns Lower

Micron Shares Soar; Chipmaker Is 'Managing for Profitability' Now, Says Analyst

Micron Shares Soar; Chipmaker Is 'Managing for Profitability' Now, Says Analyst

Big Banks' Shift to Digital Could Bring These Significant Shareholder Benefits

Big Banks' Shift to Digital Could Bring These Significant Shareholder Benefits