EDS Shares Fall Despite Record Q4

Shares in EDS , the Plano,
Texas-based business services provider (BSP) fell 4.7 percent, to $56.20 today, after the
firm yesterday reported its fourth quarter 2001 results.

Although the results exceeded expecations, they fell short of analysts revenue
forecasts.

Earnings per share of 81 cents were reported for the fourth quarter, excluding a
one-time credit, a 16-percent increase compared with 70 cents a year ago. For all of 2001,
EDS reported earnings per share, before one-time items, of $2.68, a 17-percent increase
compared with $2.29 in 2000.

Comparable fourth-quarter net income rose 20 percent to $396 million, versus $331
million in 2000. For the full year 2001, net income rose 19 percent to $1.30 billion,
versus $1.09 billion in 2000.

Analysts expected EDS to earn, on average, 79 cents a share, in the quarter ending in
December.

EDS achieved record total revenue of $5.9 billion for the fourth quarter and $21.5
billion for 2001. Fourth-quarter base (non-GM) revenue grew by 19 percent at constant
currency and 13 percent on an organic basis. For all of 2001, base (non-GM) revenue
increased 20 percent at constant currency and 16 percent on an organic basis.

Analyst Adam Frisch at UBS Warburg reiterated his “hold” rating on the stock, but
cut his 12-month price target to $57 from $65.

Full-year 2001 reported earnings per share were $2.81 or $1.36 billion versus $2.40
or $1.14 billion in 2000.

“EDS has stayed the course of steady, consistent, profitable growth, building trust
with our clients and employees. We have done so while maintaining an unshakable
commitment to a strong credit standing,” said Dick Brown, EDS Chairman and CEO.

“Our commitment to service excellence produced record revenues and fortified our
industry-leading business backlog at more than four times annual revenues. Productivity
gains coupled with our enhanced market-based value propositions continued to fuel our
growth and expand margins for EDS and our clients,” he added.
Fourth-quarter and full-year 2001 contract signings were $10.1 billion and $31.4 billion,
respectively, versus year-ago signings of $15.8 billion and $32.6 billion, which included
a $6.9 billion Intranet contract with Navy and Marine Corps.

In the fourth quarter, EDS again achieved double-digit base organic revenue growth
across business segments and geographic regions. Information Solutions, the company’s
strategic infrastructure business, increased its base organic revenue by 15 percent.
Business Process Management base organic revenues rose 17 percent compared with
2000.

EDS ended 2001 having signed 97 new business contracts valued at more than $250
million each.

“Entering our 40th year, our enterprise is the strongest it has ever been. EDS
continues to build on its foundation for growth with record revenues, strong sales and a
rock-solid balance sheet,” said Brown.

“Our fourth quarter free cash flow was strong and continues to strengthen our
financial profile. This performance underscores our confidence in achieving targeted free
cash flow objectives for 2002 and beyond.”

Fourth quarter operating cash flow was $768 million compared to $640 million a
year ago. Fourth quarter free cash flow, which is operating cash flow adjusted for capital
expenditures, was $453 million versus $359 million a year ago.

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