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EDS hit by US Airways' Chapter 11

Forecast slashed

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EDS (Electronic Data Systems) warned yesterday that its third quarter earnings would take a significant hit from US Airways' Chapter 11 filing on Sunday. The company slashed its forecast by almost a third following the news.

In previous forecasts EDS said it expected to lose between 23 and 33 cents per share in the second half of the year. It now says that its exposure to US Airways would likely absorb up to three cents of the earnings of five to ten cents EPS (earnings per share) that it was expecting for the quarter ending on 30 September.

According to The Financial Times, EDS said that it has $16m of assets and $27m worth of work in progress tied up in the stricken airline.

This kind of announcement would not be good news at any time, but it is particularly poor timing for the IT services company.

Last month, Moody's Investors' Service junked the group's credit rating, and only last week EDS announced that it will shed between 15,000 and 20,000 jobs over the next two years in its battle to reduce costs. These cuts are on top of the 5,000 or so redundancies it made over the last year. ®

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