Perhaps the drop in EDS share price has something to do with the following article. Moody's changed their outlook to negative from stable.
Dan
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NEW YORK (Dow Jones)--Moody's Investors Service confirmed its debt ratings for Electronic Data Systems (EDS) and changed the rating outlook to negative from stable.
At the same time, Moody's assigned its A1 rating to EDS's proposed offering of $1.5 billion of senior notes due 2004, 2009 and 2029.
The ratings confirmed are:
Electronic Data Systems Corporation -- A1 rated senior notes, (P)A1 shelf registration for senior notes, and Prime-1 rated commercial paper and extendible commercial note program.
EDS Finance plc -- Prime-1 rated commercial paper guaranteed by EDS.
The confirmation is supported by EDS's stable, predictable, and largely contractual revenue stream and healthy cash flows during both high and low economic growth. Its global presence, broad capabilities, and recognized industry expertise provide significant advantages in competing for large, global contracts. Substantial revenue opportunities will be available in coming years and EDS is well positioned to capitalize on them. The confirmation also recognizes management's firm commitment to maintaining the A1 rating, the rating agency said.
Recently, the A1 rating has come under intensifying downward pressure due to the detrimental effects to EDS's credit profile of two debt-financed transactions -- a $1.65 billion acquisition of MCI/Systemhouse in early 1999, and a recently announced plan to repurchase 27 million common shares at an estimated cost of $1.5 billion, Moody's said.
The change in outlook reflects our unease about the recent material increases in the company's indebtedness and financial leverage in light of certain risks and uncertainties, some of which relate to management's still young turnaround program. The strong cash flows that management is anticipating to restore financial leverage to a range more consistent with a solid A1 rating will require a number of accomplishments -- such as continuing revenue growth and improving operating margins -- that in Moody's opinion, are not yet sufficiently assured.
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