Reports say that Steve McCellan did not get is information from offical EDS sources -
<<The report prompted a flood of calls to the company from rival analysts, Byrum said. But the company did not hold a conference call Thursday night and did not issue its news release until mid-morning Friday. He added that McClellan received no information from official company sources.
"He quoted inside sources," Byrum said. "We don't know who they are. He's covered us since the Perot era and I'm sure he has his sources." He was referring to H. Ross Perot, the erstwhile presidential candidate who founded the company on June 27, 1962, and served as chief executive for the next 24 years.
Byrum said he is not sure what is being done to track down the source of McClellan's information. "We watch the message boards, try to find out if anyone would give inside information," he said.
McClellan's report did not make it apparent that he had any sources at all, inside or otherwise. For example, he wrote: "We previously believed there might be some material upside in our EPS estimates. This is no longer the case."
Regardless, other Wall Street analysts followed McClellan's prediction. The firm Salomon Smith Barney lowered its annual revenue estimate to $19.5 billion from $19.8 billion.
EDS said the "softening in revenue" is temporary and revenue growth will improve in the second half of the fiscal year. It also said it continues to realize cost savings and productivity improvements.
Many Wall Street firms reacted adversely to their analysts' discussions with the company's management. Before the stock market opened Friday, the influential firms Goldman, Sachs, Merrill Lynch and Morgan Stanley Dean Witter all lowered their ratings on the stock.
"In a stunning action late yesterday, management revised its base revenue forecast materially lower," wrote Merrill Lynch's analysts, who now rate the stock "accumulate," a rating level below "buy." The firm managed a public offering for EDS within the past three years. "This is a major disappointment and apparently followed a close review of May results and a reassessment of the '00 outlook by the company."
Not all analysts were pessimistic. Based on the belief that revenues will "ramp up in the second half of the year as large contracts last year start to impact top line favorably," the firm A.G. Edwards & Sons increased its rating on the stock to buy from accumulate. In its recommendation, the firm also cited the newly fallen stock price. >>
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At projected current years earnings around $2.20 per share, EDS PE ratio is about 20 at $44. This is getting to be pretty much rock bottom unless the company is about to declare chapter 11. |
