NMCI project is sinking EDS' earnings

Illustration by Michael J. Bechetti

EDS Corp.'s federal government revenue increased by 20 percent in the first quarter of 2004, but the huge Navy-Marine Corps Intranet project is still draining company profits, according to company statements.

The Plano, Texas, company's government revenue was $745 million, essentially flat compared to the same quarter last year. But the government sector suffered an operating loss of $57 million in the first quarter, which EDS attributed to NMCI and the loss of some state government work, especially a Texas Medicaid contract.

Affiliated Computer Services Inc. of Dallas won the Medicaid contract from EDS in a recompetition, and EDS' revenue from the job ended in February, said spokesman Sean Healy. He said the contract was worth about $150 million annually to EDS.

The NMCI project generated an operating loss of $145 million, which EDS officials said was in line with their predictions.

Michael Jordan, EDS chairman and chief executive officer, spoke optimistically about NMCI in an April 26 conference call with analysts, however. He said the technical foundation of the worldwide intranet is now in place, and a deployment schedule has been finalized.

Overall, EDS reported a 2004 first quarter net loss of $12 million on revenue of $5.4 billion, compared to a net loss of $1.4 billion and $5.2 billion revenue in last year's first quarter.

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