Sales for the quarter were up 5% – only 1% organically – to $5.45bn, a notch above analysts’ expectations of $5.41bn, according to Thomson Financial. Revenue was relatively flat in EDS’ two main geographies, the Americas and EMEA, but its US government business grew 10% to $620m. Asia-Pacific sales jumped 26% to $445m, due primarily to revenue from Mphasis, the Indian offshore firm EDS acquired last year.
Net income of $147m was up 34% from the same period last year, and EPS of $0.27 beat the Street by a penny.
The bookings softness was the low point of the quarter. The company said it had already this quarter signed one of the three big deals that got away in Q3, and it has some 50 deals worth more than $100m apiece coming up in the second half of the year. EDS booked only six deals of this value in Q2.
But new business is tilted more toward its application business, which got a big boost from the Mphasis takeover and has been a focal point for EDS. Infrastructure outsourcing still makes up most of EDS’ revenue, but applications work accounted for 43% of new business signings, with 38% of bookings from infrastructure work.
EDS’ BPO business still hasn’t made much of a splash, and the company said it is making investments in the area. This quarter it launched a midrange credit card processing platform in Brazil, as well as a benefits platform and its second-generation full-scale HRO platform.
EDS also recently announced that CEO and chairman Michael Jordan would be stepping down from the CEO role in September and would be replaced by current president and COO Ron Rittenmeyer. But the leadership change hasn’t been met with any jitters in the market, and it appears the transition will be a smooth one.
EDS stuck with its previous full-year guidance of EPS between $1.55 and $1.60 on sales of $22bn to $22.5bn. It had said that bookings might top $23bn for the year, but the Q2 signings have now knocked that forecast down to approximately $23bn, the company said.
EDS reported its figures after market close on Wednesday. Shares were down 3% to $25.50 in after-hours trading.
