Updated from April 26EDS ( EDS) has run into more glitches. To be fair, the computer services giant did manage to meet profit expectations -- and even top revenue estimates -- for the latest quarter. It also grew contract bookings by one-third from last year's dismal levels. But it generated negative cash and trimmed its cash flow guidance for the year. It also issued new second-quarter and 2004 profit estimates that fall well below consensus estimates. Still, the company adopted a decidedly upbeat tone when announcing its latest results. "We are pleased with the progress we made in the quarter," CEO Mike Jordan stated. "We met our financial commitments, delivered excellent programs for our clients, finalized our leadership team and began to generate sales momentum. ... 2004 will be a year of execution where we continue to build EDS." Apparently, the market wanted far more. Shares of EDS slid 3.8% to $18.50 in early Tuesday trading.
For starters, EDS met profit expectations by actually losing $3 million -- or a penny a share -- in the first quarter. The company earned 7 cents a share when it was booking less revenue a year ago. First-quarter revenue climbed 4% to hit $5.43 billion and beat the consensus estimate by $340 million. Contract bookings, lifted by small and renewing accounts, jumped 33% to $4 billion. But the company enjoyed weak year-ago comparisons. Bob Djurdjevic, an industry analyst at Annex Research in Phoenix, pointed out that the year-ago first-quarter bookings were themselves 58% below 2002 levels. Since then, he said, EDS has replaced only $1 billion of that lost business at a time when its biggest competitors are reporting substantial growth. Moreover, he added, EDS is actually losing business in a North American market that's clearly on the rebound. "The biggest challenge for EDS continues to be growing sales," said Djurdjevic, who has no position in the stock. "They have their work cut out for themselves. The latest results just confirm that."