Plano, Texas-based EDS said it expects to miss its target of between $75m and $125m free cash flow, which it announced just two weeks ago, as a result of a delayed $98m payment from bankrupt client MCI WorldCom. The company said that the payment, which is due July 7, would now occur later this year, and as a result this will boost its cash flow in the second half of 2003 above its guidance of between $200m and $350m.

EDS’s financial troubles had momentarily taken a back seat after it announced late last week that it had secured a 449m euro ($513m) contract with the Flemish Government, which it won in a consortium bid with local network integrator Telindus Group. Through the deal, EDS will act as the prime contractor on the project for the Ministry of the Flemish Community, and Heverlee, Belgium-based Telindus, will act as a subcontractor on the five-year deal. Luc Van Utterbeek, a spokesperson for Telindus told ComputerWire: We are currently involved in the evaluation process, however EDS has the biggest part of the deal, and the minimum we expect to receive is 12% of the deal value, and up to a total of 20%.

EDS and Telindus will provide a range of services to the government department including application development and maintenance, network, security and user support, as well as infrastructure implementation for the next five years. Through the deal Telindus is providing network and security hardware, alongside implementation services, as well as managing the ongoing operation of the network under the five-year deal. EDS would provide outsourced application development and maintenance services. Van Utterbeek said the deal will involve the transfer of an unspecified number of the 200 IT staff engaged in the government department to EDS and Telindus.

According to Van Utterbeek, the EDS-Telindus bid was won against competition from two rival consortiums, comprising Germany’s Siemens and IBM, and Cap Gemini Ernst & Young with partners Unisys, and T-Systems. The non-exclusive project also enables other Flemish government departments to purchase services from the consortium of EDS and Telindus through additional contracts.

Following the anticipated $98m bonus from WorldCom in the second half of 2003, EDS now says it is re-affirming its guidance of free cash flow of between $800m and $1.1bn in 2003. However, despite the glimmer of better news, EDS’s stock was downgraded last week after it announced its intention to raise $1.7bn through issuing new debt, which will fund ongoing operations. The company also plans to cut some 2% of its 134,000 global workforce, and refocus around outsourcing and offshore services. It will take a related charge of between $425m to $475m in full-year 2003 to cover this.

Source: Computerwire