Magazine article American Banker

Will $19B of New Deals Revive EDS?

Magazine article American Banker

Will $19B of New Deals Revive EDS?

Article excerpt

Even with its stock mired in a negative run, Electronic Data Systems Corp. is showing signs that its station could improve soon.

The technology services giant, which last year derived about 14% of its $14.4 billion revenues from financial services, has signed blockbuster contracts in the last 12 months worth about $19 billion, according to Karl Kierstead, analyst at Lehman Brothers, New York.

In financial services alone, EDS has struck deals worth $5.9 billion, including last week's $3.7 billion deal with Commonwealth Bank of Australia Ltd.

"It's an absolutely astounding amount of new business," said Mr. Kierstead.

The market has not treated Plano, Tex.-based EDS well recently.

On Aug. 7 the company announced pre-charge second-quarter earnings of 39 cents per share-6 cents per share below consensus estimates. EDS stock dropped about $6 on the news. Trading at around $37 midday Friday, EDS shares are off about 31% from a year earlier.

But analysts said the company's long-term prospects look better in light of the new business coming in.

For instance, the Commonwealth Bank deal would bring EDS revenues through 2006. Under terms of the proposed deal, EDS Australia would develop and run the bank's entire technology operations.

Sources said about 1,500 bank employees would shift to EDS, and Commonwealth Bank would receive a 35% stake in EDS Australia.

The Commonwealth deal gives EDS "a hallmark account" and "momentum" in financial services, said Gregory Gould, analyst at Goldman Sachs & Co. …

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