Contracts Catapult EDS

The IT services giant's first-quarter profit increases by $20 million, and revenue tops analysts' estimates.
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Updated from 6:29 p.m. EDT

Helped by billion-dollar contracts,

Electronic Data Systems'

(EDS)

first-quarter profit pushed higher although the company missed Wall Street's estimates and guided lower for the second-quarter earnings.

But on a conference call with analysts, EDS CEO Mike Jordan said that the company's $3.9 billion contract extension with the Navy has helped the company turn a corner, and now it is in "a two-party race" with

IBM

(IBM) - Get Report

for the bulk of the IT services mega deals.

During the quarter, EDS also renewed a contract with

General Motors

(GM) - Get Report

for $3.6 billion. Total contract signings for the quarter was $10 billion, up 45% from the $6.9 billion a year ago.

The IT services giant said late Tuesday that it earned $24 million, or 5 cents a share for the first quarter, up from $4 million, or a penny a share, during the parallel quarter last year.

The company earned $69 million, or 13 cents a share, when excluding items such as an after-tax loss of $9 million (a penny a share) for discontinued operations and $53 million before taxes (7 cents a share) for stock-options expenses.

Assuming analysts excluded the discontinued operations and included the stock-option expense in their estimates, the company's earnings of 6 cents a share missed the Thomson First Call consensus of 8 cents a share.

In the year-ago quarter, EDS earned $42 million, or 8 cents a share minus items.

On the top line, EDS posted $5.08 billion, above the $4.74 billion in sales a year ago and the First Call estimate of $4.8 billion.

"EDS posted solid financial performance in the first quarter and continued to make progress on investment initiatives, while securing two landmark contracts for the company," CEO Mike Jordan said in a statement.

Shares of the company were down after the bell, dipping 47 cents, or 1.7%, to $27.15.

For the second quarter, EDS said EPS would range from 12 cents to 17 cents including a 5-cent stock compensation expense and that revenue would range from $5 billion to $5.2 billion.

The average forecast for the IT services giant is 18 cents a share on revenue of $5.08 billion.

EDS also reiterated its full-year projections, forecasting an EPS including stock compensation expense between 83 cents and 89 cents, with sales tallying $20 billion to $20.5 billion. On that basis, EDS would meet the average EPS projection of 89 cents and the consensus revenue estimate of $20.17 billion.

Jordan said the company has had a strong start to the second quarter already, signing a

signed a seven year deal worth $1.7 billion with

Kraft Foods

(KFT)

.

As previously reported, the company said it has offered to

buy a controlling stake in Bombay-based

Mphasis

which would double its presence in India by the end of 2006, expand its capabilities in financial services, applications development and the higher growth business processing outsourcing. The company said it was too early to factor Mphasis into its guidance.

EDS closed the regular session up 3 cents to $27.62.

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