Updated from July 28

EDS ( EDS) posted a gain-assisted second-quarter profit Wednesday and closed out a troublesome contract.

For the quarter ended June 30, the Plano, Texas, computer outsourcing giant posted a profit of $270 million, or 54 cents a share. That's up from the year-ago profit of $88 million, or 18 cents a share. Revenue rose to $5.24 billion from $5.06 billion a year earlier.

The latest quarter was affected by several items, notably an 81-cent-a-share gain on the sale of a unit and a 17-cent charge on a money-losing contract that the company was finally able to close out. EDS has referred to the deal in recent years only as its "other commercial contract."

On a pro forma basis, excluding all the latest-quarter items, EDS posted a loss of $16 million, or 3 cents per share. The company said that's in line with its prior guidance.

"EDS remains a tale of two cities," CEO Mike Jordan said in a press release. "Our ongoing business is now fully competitive, with increasing sales momentum reflected in our results as we lay the groundwork for further gains in 2005.

"At the same time, we continue to be burdened by the cleanup of past problem contracts, as exhibited by our lower cash flow guidance on Navy and the charge this quarter to terminate the company's 'other commercial contract.'"

The news comes on the heels of a series of setbacks at EDS, notably a mid-July debt downgrade and yesterday's decision to pare the quarterly dividend by 67%.

EDS said it had just $700 million in net debt at the end of the second quarter. The company said it "reached out to all of its major clients and prospects following the recent Moody's action to ensure they understand the company's financial health," adding that it hopes to hit 2004 sales targets. First-half contract signings rose 30% from a year ago in dollar value, EDS said.

On Thursday, EDS rose 49 cents to $17.76.

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