I've been skeptical of Electronic Data Systems' (NYSE:EDS) prospects in the past. However, management at the information technology (IT) consulting firm continues to streamline operations and increase top-line growth. And it looks like the changes are sustainable.
In the fiscal fourth quarter, revenues increased 11% to $5.7 billion. Contract signings added up to $7.6 billion, which compares to $5.3 billion in the same period a year ago. Some of EDS's new customers include biggies like Vodafone Group (NYSE:VOD). Net income was $217 million, or $0.40 per share, up from $112 million, or $0.21 per share, in the same quarter in 2005.
Background
Founded in 1962, EDS is now a global IT powerhouse, helping companies build call centers, claims processing systems, and back-office operations. The contracts are long-term and have big price tags -- in some cases, more than $100 million.
Several years ago, EDS was on the verge of implosion because of a botched contract with the U.S. Navy. Since then, it has taken the necessary steps to right-size; these include building global data facilities, investing in sales, hiring offshore talent (especially in India), and streamlining overhead.
Of course, it hasn't been perfect. For example, Verizon (NYSE:VZ) recently cut a year from its 10-year contract with EDS; the work is going to remain in-house for Verizon. There is also intense competition from Accenture (NYSE:ACN) and IBM (NYSE:IBM), as well as the fast-growing Indian players like Wipro Ltd. (NYSE:WIT) and Infosys (NASDAQ:INFY).
Takeaway
Going forward, EDS expects earnings of $0.17 to $0.22 per share in the first quarter, with revenues of $5.1 billion to $5.3 billion. As for the full-year forecast, earnings per share are expected to be $1.60 on sales of $22 billion to $22.5 billion.
These are good numbers, although there's a chance they'll be better. EDS is still focused on cost-cutting (and moving offshore), and is seeing lots of momentum in landing new customers. Instead of focusing on survival, now EDS can finally spend its time capitalizing on growth opportunities.
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Fool contributor Tom Taulli does not own shares of any company mentioned in this article. The Fool has a shiny disclosure policy.
