Updated from 8:23 a.m. EDT

EDS

(EDS)

said second-quarter earnings quadrupled from a year ago as sales improved and its operating margin widened significantly, but light guidance sent the stock slipping on Tuesday.

Shares of the IT-services firm fell 0.7 %, or 16 cents, to $23.74 in recent trading.

The technology-services company earned $104 million, or 20 cents a share, on sales of $5.19 billion in the quarter, compared with earnings of $26 million, or 5 cents a share, on sales of $5 billion a year ago. Analysts surveyed by Thomson First Call were forecasting earnings of 16 cents a share on sales of $5.14 billion in the most recent period.

EDS' operating margin was 3% in the latest quarter, up from 1.7% a year ago.

"EDS continued to drive operational and financial improvements in the second quarter," CEO Mike Jordan said in a statement. "Our bottom line benefited from the improved performance of some of our largest accounts, and we expect our margins to continue to expand as we ramp up our productivity and Best Shore initiatives."

On a morning call with financial analysts, Jordan said the company had a very good second quarter, and added that he was happy with its performance.

Jordan said that although India-based companies are making some headway in mega-deals, the environment still favors the large multinationals.

"It's pretty stable," Jordan said. "Our pipeline remains solid."

Signings were up 100% year over year. Jumbo-sized deals for the quarter included

Kraft Foods

(KFT)

,

Bank of America

(BAC) - Get Report

and the

Commonwealth Bank of Australia

. Jordan said that "hiccups" with a large U.K. Ministry of Defense contract have been resolved and the deal is proceeding smoothly.

During the quarter, the company extended its offshore capability when it

acquired a majority stake in Mphasis, Jordan said. EDS' Indian operation and Mphasis are in the process of merging, creating the third-largest multinational in the country.

In addition to shifting work to lower-cost locations, EDS will cut its staff by an additional 3,000 to 4,000 people by the end of the year, eliminating "redundant" positions. The company slashed 1,000 jobs earlier this year.

"We see the second half pretty strong and we're looking forward to completing the year and entering 2007 with real momentum," Jordan said.

In the third quarter, EDS expects to earn 16 cents to 21 cents a share, excluding some items, on sales of $5.3 billion to $5.5 billion. Analysts surveyed by Thomson First Call had been forecasting earnings of 29 cents a share on sales of $5 billion in the quarter.

In the full year, EDS expects to earn 83 cents to 93 cents a share before items on sales of $21 billion to $21.5 billion. Analysts surveyed by Thomson First Call were expecting earnings of 89 cents a share on sales of $20.46 billion.

The company said severance costs will likely steer full-year EPS to the lower end of its range, but that the reduction in headcount will have a positive effect on 2007 earnings and margins.

EDS said it is continuing its search for a new CFO.