EDS Falls After Xerox Dispute Trims 4th-Qtr Sales (Update1)
Bloomberg News
February 5, 1999, 3:01 p.m. ET
EDS Falls After Xerox Dispute Trims 4th-Qtr Sales (Update1)
(Updates share activity in first 2 paragraphs.)
Plano, Texas, Feb. 5 (Bloomberg) -- Electronic Data Systems
Corp. shares fell as much as 13 percent after the second-biggest
U.S. computer services company said a legal dispute with Xerox
Corp. shaved fourth-quarter revenue by $200 million.
The shares fell 5 15/16 to 46 1/16 in midafternoon trading
of 2.41 million. Earlier, they touched 45 1/2.
The lawsuit and concern about slowing sales growth spooked
investors who had expected EDS to begin turning around after a
year of lower profits, analysts said. Before today, EDS shares
climbed 28 percent since Dec. 10, largely on anticipation that
new Chairman and Chief Executive Richard Brown will wring more
profits out of contracts to manage other companies' computers.
''The stock may have gotten a little ahead of itself with
Mr. Brown,'' said Doug Johanson, a portfolio manager with IMS
Capital Management in Clackamas, Oregon, which owns about 65,000
EDS shares.
Brown's predecessor, Les Alberthal, resigned in August, and
concern about the company's leadership damped contract signings.
Plano, Texas-based EDS booked $2.5 billion in new business during
the quarter, short of the $3.6 billion forecast by Prudential
Securities analyst Thomas Browne.
''The recent turmoil at the top of the house has affected
EDS's new-business sales performance,'' said Robert Djurdjevic,
president of Annex Research in Phoenix.
EDS sued Xerox in New York State Court yesterday after a
year of negotiations failed to resolve issues related to EDS's
$3.2 billion, 10-year contract to manage Xerox's computer system,
EDS Vice President Myrna Vance said. The legal dispute reduced
fourth-quarter revenue by $200 million, EDS said when it reported
earnings after the close of markets yesterday.
EDS is meeting its obligations under the contract signed in
1994, Vance said. In its lawsuit, EDS seeks to recover more than
$200 million from Xerox, she said. Vance provided few other
details of the litigation, citing a confidentiality agreement.
Xerox spokesman Jeff Simek said the company intends to
contest EDS's claims.
EDS last sued a customer in 1992, when it squared off with
the state of Florida over a contract to consolidate computer
systems for the state's health department. The two sides resolved
the dispute through mediation in 1995.
--Loren Steffy in Dallas (214) 855-5103 through the Princeton
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