EDS Reports Q1 2006 Results

* Contract signings of $10 billion, up 45 percent year-over-year

PLANO, Texas, May 2 /PRNewswire-FirstCall/ -- EDS (NYSE: EDS) today reported first quarter net income of $24 million, or 5 cents per share, versus net income of $4 million, or 1 cent per share, in last year's first quarter. EDS' pro forma first quarter net income was $69 million, or 13 cents per share, versus first quarter 2005 pro forma net income of $42 million, or 8 cents per share.

Pro forma first quarter 2006 net income and EPS exclude after-tax losses of $9 million (1 cent per share) for discontinued operations; and $53 million pre-tax (7 cents per share) for expensing of stock options and performance- based restricted stock units related to continuing operations.

"EDS posted solid financial performance in the first quarter and continued to make progress on investment initiatives, while securing two landmark contracts for the company," said Mike Jordan, EDS chairman and chief executive officer.

EDS signed $10 billion in contracts in the first quarter, up 45 percent from $6.9 billion in the year-ago quarter.

As previously announced, EDS signed significant first quarter contract renewals and/or extensions with General Motors, $3.6 billion, and the U.S. Department of the Navy, $3.9 billion. Other first quarter contract highlights include approximately $400 million in new HR outsourcing contracts, including a major end-to-end HR services contract for ExcellerateHRO.

EDS started the second quarter with strong momentum in contract signings, just last week announcing a $1.7 billion IT infrastructure services agreement with Kraft Foods Inc.

EDS posted first quarter revenue of $5.08 billion, up 10 percent on an organic basis (which excludes the impact of currency fluctuations, acquisitions and divestitures) from $4.74 billion in the year-ago quarter(1).

Free cash flow was an outflow of $38 million in the first quarter, an improvement of $44 million versus the year-ago period. (See Note 2 to the Summary of Consolidated Cash Flows for a discussion of free cash flow.)

EDS' operating margin for the first quarter was 1.5 percent. Pro forma operating margin, excluding the items referred to above, was 2.6 percent, compared to 1.4 percent in the year-ago quarter.

"We continue to improve our performance on major contracts, including NMCI, and increase our efficiency around service delivery," said Ron Vargo, interim co-chief financial officer and treasurer. "The acceleration of our investment initiatives, as we move to the deployment phase of our program, gives us increased confidence in the free cash flow and operating margin reflected in our full-year guidance and builds conviction around our longer- term financial goals."

    First Quarter Results by Segment
     *  Americas: First quarter revenue was $2.30 billion, up 3 percent
        compared to the prior year period.  Operating profit was $306 million,
        up 10 percent from the prior year period due to improved operating
        performance on certain major contracts and productivity.
     *  EMEA: First quarter revenue was $1.60 billion, up 16 percent from the
        prior year period, driven primarily by the company's U.K. Ministry of
        Defence contract entered into in March 2005.  Operating profit
        increased 29 percent to $182 million versus the prior year period of
        $142 million, driven primarily by productivity, growth and a contract
        settlement, partially offset by development costs associated with the
        U.K. Ministry of Defence contract.
     *  Asia-Pacific: Revenue for the first quarter increased 8 percent versus
        the prior year period of $303 million.  The region posted an operating
        profit of $30 million for the quarter, up from a profit of $15 million
        in the year-ago quarter.
     *  U.S. Government (including NMCI): Revenue increased 28 percent to
        $840 million, and operating profit increased to $90 million for the
        quarter, up $73 million versus the year-ago period primarily due to
        improvements in the NMCI contract and the impact of the contract

All comparisons are at constant currency and exclude the impact of expensing stock options and performance-based restricted stock units related to continuing operations.

    2006 Guidance
    For second quarter 2006, EDS currently expects:
     *  Pro forma EPS of 17 to 22 cents(2), 12 to 17 cents including impact
        from expensing stock options and performance-based restricted stock
     *  Revenue of $5.0 billion to $5.2 billion

This guidance reflects a significant step-up in both year-over-year and sequential investments in delivery realignment and productivity-related initiatives.

    For full-year 2006, EDS reiterates its previously issued guidance:
     *  Pro forma EPS of $1.05 to $1.15(2), $0.83 to $0.93 including impact
        from expensing stock options and performance-based restricted stock
     *  Free cash flow of $800 million to $1.0 billion
     *  TCV of $23 billion-plus
     *  Revenue of $20.0 billion to $20.5 billion

    Conference Call

EDS' earnings conference call will be broadcast live on the Internet today at 4 p.m. Central time (5 p.m. Eastern). To access the call and view related financial information, go to http://www.eds.com/investor . If you are unable to listen during the live Webcast, the call will be archived for 30 days at http://www.eds.com/investor .

About EDS

EDS is a leading global technology services company delivering business solutions to its clients. EDS founded the information technology outsourcing industry more than 40 years ago. Today, EDS delivers a broad portfolio of information technology and business process outsourcing services to clients in the manufacturing, financial services, healthcare, communications, energy, transportation, and consumer and retail industries and to governments around the world. Learn more at http://www.eds.com .

     (1)  Excludes discontinued operations for all periods presented.
     (2)  2006 pro forma EPS guidance excludes expenses related to stock
          options, performance-based restricted stock units and discontinued

Statements in this press release that are not historical statements, including statements regarding forecasted revenue, EPS, free cash flow, and TCV 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 our control, which could cause actual results to differ materially from such statements. These include, but are not limited to, the performance of current and future client contracts in accordance with our cost, revenue and cash flow estimates, including our ability to achieve any operational efficiencies in our estimates; for contracts with U.S. Federal government clients, including our NMCI contract, the government's ability to cancel the contract or impose additional terms and conditions due to changes in government funding, deployment schedules, military action or otherwise; our ability to access the capital markets, including our ability to obtain capital leases, surety bonds and letters of credit; the impact of rating agency actions on our ability to access capital and our cost of capital; the impact of third-party benchmarking provisions in certain client contracts; the impact on a historical and prospective basis of accounting rules and pronouncements; the impact of claims, litigation and governmental investigations; the success of our multi-year plan and cost- cutting initiatives and the timing and amount of any resulting benefits; the impact of acquisitions and divestitures; a reduction in the carrying value of our assets; the impact of a bankruptcy or financial difficulty of a significant client on the financial and other terms of our agreements with that client; with respect to the funding of pension plan obligations, the performance of our investments relative to our assumed rate of return; changes in tax laws and interpretations and failure to obtain treaty relief from double taxation; failure to obtain or protect intellectual property rights; fluctuations in foreign currency, exchange rates and interest rates; the impact of competition on pricing, revenues and margins; and the degree to which third parties continue to outsource IT and business processes. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by law.

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