For the third quarter, base (non-GM) organic revenue grew by 17 percent versus the year-ago period. Total third quarter revenue rose 16 percent to $5.6 billion. Contract signings increased 10 percent to a third-quarter record $6.8 billion. For the first nine months of 2001, contract signings increased 27 percent to $21.3 billion versus $16.8 billion in the year-ago period.

Third quarter milestones, excluding one-time items, are:

Eleventh consecutive quarterly record for contract signings.

Tenth consecutive quarter of double-digit year-over-year EPS growth.

Tenth consecutive quarter of year-over-year operating margin improvement. Operating margin was 11.2 percent for the quarter and is at 10.1 percent on a trailing four-quarter basis.

Fourth consecutive quarter of base organic revenue growth above the market’s rate of growth.

EDS continues its broad-based growth despite an uncertain world economy, said Dick Brown, chairman and CEO. This performance is further testimony to the strength and diversity of EDS and its innovative service offerings. We remain confident in our ability to deliver on our commitments to shareholders and clients.

EDS again recorded double-digit base organic revenue growth across business segments and geographic regions. With a 21 percent revenue increase, Information Solutions, EDS’ strategic infrastructure business, achieved its third consecutive quarter of 20 percent or better organic growth. Business Process Management base revenues were up 19 percent from a year ago.

E Solutions significantly exceeded the market rate of growth for the seventh consecutive quarter with a 45 percent revenue increase, enabling a 13 percent rise in EDS’ consulting sector revenues. Reflecting the overall softness in the management-consulting market, A.T. Kearney’s revenues declined 8 percent. Including the acquisition of Structural Dynamics Research Corporation (SDRC), effective September 1, 2001, revenues for PLM Solutions, EDS’ product lifecycle management business, grew 63 percent in the quarter. Organic revenues for PLM Solutions grew 15 percent, excluding the impact of the acquisition.

By geography, base organic revenues increased 23 percent in Europe, Middle East and Africa, 16 percent in the United States, 24 percent in Latin America and 12 percent in Asia Pacific.

EDS’ continuing momentum is a direct result of our commitment to service excellence, said Brown. Our renewal rate with existing clients has reached unprecedented levels, and our growing reputation for client service is driving new opportunities.

The company’s pipeline of business opportunities, including 88 contracts valued at more than $250 million, positions EDS for strong future growth. EDS’ backlog of signed business remains strong and continues to grow.

On the impact of the September 11 tragedy, Brown said: These devastating events further emphasize that business continuity and disaster recovery planning is an imperative, not an option. With our global infrastructure and know-how, EDS is the company clients can trust to safeguard their core intellectual capital and digital assets.

Brown noted EDS has experienced a significant increase in inquiries on disaster recovery, physical security and business continuity planning. He also said the company expects some near-term pressure in certain areas including travel and transportation but is confident EDS can absorb any weakness in a particular business segment without a negative impact to our overall results.

Benefiting from ongoing actions to improve efficiencies, EDS is now running at a four-quarter trailing operating margin of 10.1 percent, advancing by a quarter its commitment to achieve double-digit operating margin performance. EDS’ third-quarter operating margin was 11.2 percent versus 9.7 percent in the year-ago quarter.

We’ve embedded productivity into our culture and made it a competitive advantage for EDS, Brown said. We’re proud of what we’ve done, and we will continue to drive efficiency improvements throughout the company.

Third quarter and year-to-date financial highlights, excluding one-time items, are:

Third quarter earnings per share, up 17 percent vs. comparable third quarter 2000 results. For the year-to-date, earnings per share increased 18 percent over the comparable prior-year results.

Operating margin, 11.2 percent in the third quarter, 150 basis points higher than in the year-ago period. For the year-to-date, operating margin improved to 9.9 percent, an 80 basis point increase from the prior-year period. Operating margin on a trailing four-quarter basis, which adjusts for seasonality, reached 10.1 percent.

Base organic revenue grew by 17 percent both in the third quarter and for the year-to-date. Organic revenue growth excludes the impact of currency, acquisitions and divestitures.

Base revenue, as reported, grew by 22 percent in the third quarter and 16 percent for the year-to-date.

Total revenue grew 16 percent in the third quarter, reflecting a 10 percent decline (9 percent at constant currency) in GM revenues, and 11 percent for the year-to-date, reflecting a 7 percent decline (6 percent at constant currency) in GM revenues. GM represented 14 percent of total revenues in the quarter.

Reflecting the impact of acquisitions, third quarter return on net assets was 13.3 percent, compared with 13.7 percent in the year-ago quarter. Year-to-date return on assets was 13.1 percent, an increase of 20 basis points over the year-ago period.

Third quarter return on equity was 23.8 percent, a 110 basis point increase from the same period in 2000. Year-to-date return on equity was 22.3 percent, an increase of 90 basis points over the year-ago period.

Since the end of the second quarter, EDS:

Launched PLM Solutions to create a new line of business targeting the Product Lifecycle Management software and services market, which is forecast to reach $35 billion by 2005.

Won a 10-year, $679 million contract in Australia to manage Westpac Banking Corporation’s mortgage processing operations. EDS is now the world’s leading provider of mortgage processing services.

Was awarded a five-year agreement to build and operate an on demand IT infrastructure for the Coors Brewery Company. An important factor in this major win was EDS’ Continuum of Services alliance with Sun Microsystems.

Won a five-year, $132 million contract to continue to support the system that enables the U.S. Army to sign up new recruits from any community location nationwide. The new contract continues the process of Web-enabling the Army Recruiting Information Support System (ARISS) and provides for continuing modernization of ARISS.

SOURCE: COMPANY PRESS RELEASE