EDS: Y2K Hangover?

When Richard Cheney decided to become George Bush’s running mate, he was
definitely forgoing lots of lucrative deals. Perhaps the deal with the best
upside was his board seat with EDS

While the stock has had a fall-off, I think the future looks particularly
bright. The company is a mega e-business and technology services company.
In all, EDS has about 9,000 clients in 50 countries.

In the past quarter, the company had a profit of $254.3 million and sales of
$4.6 billion. Unfortunately, the sales growth was basically flat (compared
to the same quarter a year ago).

But this appears to be temporary. If anything, the company has been
snagging huge contracts, which should help propel the revenue growth rate.
For example, the company signed a 10 year contract with the UK Government
Department of Social Security. Estimates show that the contract will mean
$2.5 billion in revenues for EDS.

So why was there a slowdown with EDS? First of all, many high-tech
consulting firms relied heavily on Y2K clean-ups. And EDS was no exception.
The company has had to deal with the transition.

Also, EDS has been undergoing a reorganization, especially in the make-up of
the sales divisions. About 8,000 employees have lost their jobs. There is
also a new CEO, Dick Brown (formerly the CEO of Cable & Wireless).

But the fact remains that there is a mega trend for companies to invest for
the digital economy. In other words, EDS is likely to see other big deals.

Interestingly enough, EDS board member Ray Hunt thinks there is upside.
When the stock fell into the low $40s, he was quickly buying shares – about
$14.3 million. It was his first purchase in four years.

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