Sales and IT contracts boost profits at EDS

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Increased sales and improved execution of IT contracts helped boost profits at Electronic Data Systems, capping a year of changing fortunes at the computer outsourcing group.

“On balance, this was the strongest quarter EDS has had since I joined the company in 2003,” said Michael Jordan, chief executive. “We had a great sales quarter. Both growth momentum and productivity and execution momentum have the right base for carrying through to achieve our 2007 goals.”

The results extended the recent recovery at EDS, which has begun to emerge from a three-and-a-half-year shakeup.

EDS’s stock price had suffered in recent years from a bloated cost structure and a number of big, underperforming contracts.

News of the results pushed shares in the company up 4.4 per cent in after-hours trading. The shares had risen from a recent low of $22.60 in July.

EDS, whose competitors include International Business Machines and Computer Sciences Corporation, reported a net income of $217m in the fourth quarter, or 42 cents a share. That compared with a net income of $112m, or 21 cents a share, a year earlier.

Revenues were $5.7bn, an improvement of nearly 11 per cent over the year-ago period.

Operating margin – a common measure of the overall profitability of a business – was 6.8 per cent, compared with 4.4 per cent in the same period last year, reflecting progress in the company’s cost-cutting efforts.

For the full year, EDS made a net profit of $470m on sales of $21.3bn. Mr Jordan, who launched the turnaround after he took charge of the company nearly four years ago, said improved execution of so-called “milestone” contracts – in which the amount the company is paid for an outsourcing project depends on whether it meets certain deadlines or performance standards – had also contributed to the quarter’s results.

EDS said its guidance for the 2007 fiscal year remained unchanged. It said it expected earnings per share this year of $1.60 on sales of $22bn-$22.5bn.

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