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Strategies & Market Trends : LastShadow's Position Trading

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To: jtech who wrote (42559)	9/25/2002 8:04:49 AM
From: LastShadow	Read Replies (1) of 43080

Electronic Data Systems EDS fell 29.3% to $11.68 after several investment banks downgraded the stock Tuesday. Merrill Lynch MER warned the information-technology service provider may incur a loss from settling exposure to derivative instruments, or contracts based on underlying securities. Settling the potential loss could wipe out the company's free cash flow for 2002, the Merrill analyst said. In addition, a Sanford Bernstein analyst speculated the SEC might begin an informal inquiry into EDS' accounting. In a press release, EDS contended that the SEC has not notified it of any investigation and that "recent settlement of prior hedging transactions for its employee stock option benefit plans has no impact on earnings." Shares of EDS plummeted last week after the firm cut its outlook for the rest of the year. In its revised estimate, the company said third- and fourth-quarter earnings are now expected to miss estimates by as much as 80% and 35%, respectively. "The market is afraid that there are additional skeletons in EDS' closet," said Morningstar stock analyst Mike Trigg.

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