NMCI continues to drag down EDS

EDS Corp.'s federal government revenue increased 20 percent in the first quarter of 2004, but the huge Navy-Marine Corps Intranet project still drains the Plano, Texas, company's finances, according to company statements.

The company's overall 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 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.

Mike 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.

At least 280,000 seats will be active by the end of 2004, Jordan said. Healy said the 280,000 figure reflects a "more predictable" deployment schedule negotiated with the Navy.

Overall, EDS' financial picture is much brighter than the first quarter of 2003, when it posted a loss of $1.4 billion. The company's net loss for the first quarter of 2004 is $12 million, officials reported.

EDS' contract signings were up 33 percent over the first quarter of 2003, from $3 billion to $4 billion. Signings were particularly strong for contracts under $250 million and in the government, financial services, government and communications industry sectors, officials said.

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