EDS ( EDS) slipped in after-hours trading Monday after forecasting a second-quarter loss and slashing its 2004 estimates for the third straight quarter.

The troubled computer outsourcing giant also posted a first-quarter loss, as problems with its big Navy contract continue to weigh down results. The company pledged to cut its net debt to zero by year-end, however, saying it is on track with the restructuring effort being led by CEO Michael Jordan.

For the first quarter ended March 31, EDS lost $12 million, or 2 cents a share, on $5.43 billion in revenue. A year ago the company lost $1.4 billion, or $3 a share, on revenue of $5.22 billion. First-quarter revenue fell 2% from a year earlier on a so-called organic basis, excluding the impact of currency fluctuations, acquisitions and divestitures.

"We are pleased with the progress we made in the quarter," said Jordan. "We met our financial commitments, delivered excellent programs for our clients, finalized our leadership team and began to generate sales momentum. While there is work to be done, we have the financial resources, the service offerings and the commitment to aggressively compete in the market. 2004 will be a year of execution where we continue to build EDS."

Cash flow swung into the red in the latest quarter, to the tune of negative $166 million vs. the year-ago positive $122 million. The company also forecast 2004 cash flow of $300 million to $500 million. A quarter ago, the 2004 projection stood at $500 million to $600 million.

The company also forecast 2004 earnings of 20-40 cents a share. A quarter ago, EDS issued 2004 earnings guidance of 50 cents to 60 cents a share. That guidance, issued in February, fell well shy of the 98-cent consensus estimate at the time.

EDS posted an operating loss of $145 million, or 19 cents per share, in the quarter on the Navy Marine Corps Intranet program, in line with the revised full-year plan. The program also generated a cash outflow of $200 million, which is within plan, EDS said.

Latest-quarter results also reflect an operating loss and asset write- down of $94 million, or 12 cents per share, related to an unspecified large commercial contract. The company says it is pursuing a negotiated settlement with this client, which may result in termination of the contract. At March 31, EDS had remaining asset exposures of $123 million related to the contract.

For 2004, EDS forecast $20 billion to $21 billion in revenue, 20-40 cents in earnings per share, and positive free cash flow of $300 million to $500 million. Because analysts have low visibility -- and wildly varying views -- on EDS's earnings, investors have come to rely more heavily on EDS's cash flow as a measure of the company's health.

During the quarter, EDS agreed to sell its UGS PLM Solutions unit in a deal expected to close in the second quarter. The unit was treated as a discontinued operation in first quarter 2004 results. Excluding the unit, EDS posted a latest-quarter loss of $29.5 million, or 6 cents per share, vs. the year-ago net income of $8 million, or 2 cents per share. In the latest quarter, free cash flow was negative $208 million excluding UGS.

Late Monday, EDS slipped 68 cents to $18.55.

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