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EDS Guides Lower

The company cites a big contract win.
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EDS

(EDS)

swung to a first-quarter profit Monday, citing its strongest contract-signing period in three years.

But the company also trimmed earnings guidance to account for a $3.85 billion contract from the U.K.'s Ministry of Defense. EDS guided toward an unexpected second-quarter loss and reduced its full-year earnings range, though it slightly increased its revenue targets.

The Plano, Texas, computer outsourcing outfit earned $4 million, or a penny a share, in the latest quarter, reversing the year-ago loss of $12 million, or 2 cents a share. On a pro forma basis, excluding certain costs, latest-quarter earnings were 7 cents a share, ahead of the 3-cent Thomson First Call estimate.

EDS signed $7.1 billion in contracts in the first quarter, up from $3.8 billion a year ago. Signings were highlighted by the Ministry of Defense deal and continued Medicaid wins, EDS said.

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"EDS got off to a solid start in 2005, as our operational improvements continued to gain traction," said CEO Mike Jordan. "In an increasingly competitive market, we posted our strongest signings quarter since 2002 while continuing to invest in our capabilities. At this point, we believe EDS is on track to deliver on our long-term turnaround goals."

Revenue fell 5% from a year ago to $4.94 billion, while so-called organic revenue -- excluding the impact of currency fluctuations, acquisitions and divestitures -- declined by 8%. Revenue from sources other than big customer and onetime owner

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dropped 5% from a year ago and 7% organically.

The company forecast a pro forma second-quarter loss of 2 to 7 cents a share on revenue of around $5.1 billion, and a full-year pro forma profit of around 45 cents a share on revenue of $20.5 billion. Analysts had forecast an 11-cent second-quarter profit and a 56-cent full-year profit.

Late Monday, EDS slipped 13 cents to $19.30.