EDS Reports Fourth Quarter and Full-Year 2007 Results

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• Fourth quarter adjusted EPS of 55 cents, up 17% versus a year ago; fourth quarter 2007 GAAP EPS of 36 cents
• Full-year 2007 adjusted EPS of $1.56, up 58% versus 2006;
  2007 GAAP EPS of $1.35
• Fourth quarter revenues of $5.83 billion, up 2% versus a year ago
• Full-year 2007 revenue of $22.1 billion versus $21.3 billion for 2006
• Fourth quarter free cash flow of $563 million, up 44 percent versus a year ago

PLANO, Texas – EDS today reported fourth quarter 2007 adjusted net income of $295 million, or 55 cents per share, versus fourth quarter 2006 adjusted net income of $254 million, or 47 cents per share. Fourth quarter 2007 net income, in accordance with U.S. GAAP, was $189 million, or 36 cents per share, versus $217 million, or 40 cents per share, in the prior year's fourth quarter (A statement reconciling GAAP and adjusted results is included in this release).

Fourth quarter revenue increased 2 percent to $5.83 billion from $5.70 billion in the year-ago quarter(1). Fourth quarter revenue decreased 3 percent on an organic basis, which excludes the impact of currency fluctuations, acquisitions and divestitures.

“EDS posted a solid fourth quarter to end a year of operational progress in 2007,” said Ron Rittenmeyer, EDS chairman, president and CEO. “We continued to improve our competitiveness and made progress toward our financial goals.”

EDS signed $6.1 billion in contracts in the fourth quarter 2007, versus $7.6 billion in the year-ago quarter. Fourth quarter 2007 signings included seven contracts with values greater than $100 million.

Second-half 2007 total contract value was $11.8 billion, representing EDS' best second-half signings' performance since 2001, and the overall 2008 sales pipeline is up 10 percent versus the year-ago period, showing strength in both IT outsourcing and applications.

“We are pleased with recent booking trends,” Rittenmeyer said. He noted that a number of large contracts for which EDS was down-selected to one moved from the fourth quarter of 2007 into 2008.

Significant fourth quarter signings included a new contract to deliver infrastructure services to Bristol-Myers Squibb; a Medicaid contract extension with the State of Indiana leveraging EDS' leading-edge interChange Health System; and an IT services contract with Continental Airlines.

EDS continued its focus on the sale of applications services in the fourth quarter, signing $1.8 billion in contracts representing 30 percent of total contract value for the quarter. For the full year, applications services represented 32 percent of total contracts sold.

The company continued to build its presence in applications services with the fourth quarter launch of EDS' Global SAP Consulting Practice and the launch of a Global Testing Practice. In addition, EDS enhanced its applications business with the acquisition of a majority interest in Saber Solutions, a leading provider of software and solutions to U.S. state and local governments.

Fourth quarter 2007 operating margin was 7.3 percent on an adjusted basis versus 6.8 percent in the year-ago quarter (See discussion of adjusted operating margin under “Non-GAAP Financial Measures” below).

Free cash flow was $563 million in the fourth quarter of 2007, up 44 percent from the year-ago period (See discussion of free cash flow under “Non-GAAP Financial Measures” below).

Fourth Quarter Results by Segment

• Americas: Fourth quarter revenue was $2.59 billion, down 8 percent compared to the prior-year period. Operating profit was $394 million, down 28 percent from $547 million in the prior-year period, driven primarily by the previously disclosed Verizon contract termination.
• EMEA: Fourth quarter revenue was $1.77 billion, up 3 percent compared to the prior-year period. Operating profit was $352 million, up 15 percent from $307 million in the prior-year period.
• Asia Pacific: Fourth quarter revenue was $478 million, up 16 percent compared to the prior-year period. Operating profit was $71 million, up 41 percent from $50 million in the prior-year period, driven primarily by MphasiS and improved contract performance in the region.
• U.S. Government: Fourth quarter revenue was $624 million, flat compared to the prior-year period. Operating profit was $92 million, down 34 percent from $139 million in the prior-year period, due primarily to contractual price reductions.

All segment comparisons are at constant currency, exclude corporate expenses and include intersegment transactions.

Full-Year 2007 Results

EDS' 2007 adjusted net income was $828 million, or $1.56 per share, compared to adjusted net income of $522 million, or $0.99 per share in 2006. Full-year 2007 net income, in accordance with U.S. GAAP, was $716 million, or $1.35 per share, versus net income of $470 million, or $0.89 per share, in 2006.

Full-year 2007 adjusted net income and EPS exclude costs related to the company's fourth quarter 2007 early retirement offer of $154 million, or $0.18 per share, net after-tax losses associated with discontinued operations of $13 million and pre-tax items as follows: a write-off of acquired in-process research and development of $6 million and a reversal of previously recognized restructuring expenses of $4 million. Full-year 2006 adjusted net income excluded net after-tax losses associated with discontinued operations of $29 million, a pre-tax loss on divestitures of $22 million, and a reversal of previously recognized restructuring expenses of $7 million.

Full-year 2007 total revenue increased 4 percent to $22.1 billion from total revenue of $21.3 billion in 2006.

Full-year 2007 total contract value was $19.5 billion, down 26 percent from $26.5 billion the prior year. Excluding the multibillion dollar contract renewals with General Motors and the U.S. Navy in 2006, total contract value increased 2 percent year-over-year. In 2007, EDS signed 28 mega-deals with total contract values greater than $100 million versus 26 mega-deals in 2006. New logos accounted for $3.5 billion of total contract value in 2007.

Full-year 2007 free cash flow increased to $892 million, from $887 million for full-year 2006.

“EDS enters 2008 a stronger and more competitive company,” said Rittenmeyer. “Our financial priorities include driving sustainable operating margin and free cash flow improvement, building on our strong presence in ITO, continuing to enhance our capabilities in higher-margin applications services, and expanding and improving our Best Shore® global delivery. At the same time, we will always maintain our relentless focus on operational excellence, quality and our 'zero outage' goal for clients.”

2008 Guidance

• Revenue growth of approximately 2 percent.
• Adjusted EPS of approximately $1.35 (See discussion of adjusted EPS under “Non-GAAP Financial Measures” below).
• Free cash flow of approximately $900 million.
• Total contract value in excess of $20 billion.

Additional details regarding 2008 guidance will be provided at EDS' Securities Analyst Conference on February 19.

Conference Call

EDS' earnings conference call will be broadcast live on the Internet today at 4:00 p.m. Central time (5:00 p.m. Eastern). To access the call and view related financial information, go to www.eds.com/call. The call and financial information will be archived for 30 days at www.eds.com/call.

⁽¹⁾Excludes discontinued operations for all periods presented.

The statements in this news release that are not historical statements, including statements regarding financial guidance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond EDS' control, which could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see EDS' 2006 Form 10-K filed March 1, 2007. EDS disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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