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IDG News Service - IT services provider EDS reported a steep loss in its fourth quarter, ended Dec. 31, 2003, due in large part to a one-time write-off of costs related to its chronically problematic U.S. Navy/Marine Corps Intranet (NMCI) contract.
EDS posted a net loss of $354 million, or $0.74 per share, after writing down $559 million in deferred costs related to the NMCI contract. It also recognized $84 million in pre-tax restructuring charges and after-tax losses of $7 million from discontinued operations, the company said Thursday. The results compare with net income of $360 million, or $0.75 per share, in 2002's fourth quarter.
Excluding those one-time items, net income came in at $59 million, or $0.12 per share, exceeding by a penny consensus expectations from analysts polled by Thomson First Call, which didn't take into account those charges, according to a Thomson First Call spokesman. That compares with net income of $194 million. or $0.40 per share in 2002's fourth quarter.
Revenue rose 8% to $5.76 billion, helped by growth in IT outsourcing services. Thomson Financial's revenue consensus expectation was $5.4 billion, the spokesman said. Excluding the impact of currency fluctuations, revenue rose 2%, EDS said.
EDS won the mammoth, multi-year NMCI contract in October 2000. Valued at $6.9 billion at the time of signing, it has been plagued by delays and controversies over its scope.
On Thursday, EDS said it is working with the Department of the Navy to "stabilize" the NMCI program by developing a more predictable and controlled base-by-base roll-out schedule. The revised plan required the $559 million write-down in the fourth quarter, the company said.
Other NMCI adjustments include a reorganized account team that now reports directly to EDS President and Chief Operating Officer Jeff Heller and improved coordination with the Navy, EDS said. Both EDS and the Navy remain committed to NMCI, according to EDS.
For the full year, EDS posted a net loss of $1.70 billion, or $3.55 per share, compared with net income of $460 million, or $0.94 per share in 2002. Revenue rose 7% to $21.5 billion, or by 2% excluding currency fluctuations.
Looking ahead, EDS expects 2004 full-year revenue to be in the $21 billion to $22 billion range, and earnings per share in the range of $0.50 to $0.60, including NMCI, and $1.00 to $1.10 excluding NMCI.
For the first quarter of 2004, revenue is expected between $5.0 billion and $5.2 billion and per share results in the range of a $0.04 loss to a $0.01 profit, including NMCI, and earnings of between $0.15 to $0.20, excluding NMCI.
The value of contracts signed fell in the fourth quarter to $4.3 billion, from $8.1 billion in the fourth quarter of 2002.
For the full year, they fell to $14.0 billion from $24.4 billion.