EDS’s hard work pays off

Services giant EDS is attributing an increase of its profits to the fruits of a growth strategy it has been working on for the past four years.

The company has reported a rise in fourth-quarter profits of $254m (£129.7m) compared with $111m (£56.7m) last year.

Revenue grew 11 per cent to $5.7bn (£2.9bn) in the quarter, while turnover for the year increased from $19.8bn (£10.2bn) to $21.3bn (£10.9bn).

EDS chief executive Mike Jordan says the quarter was the strongest since he joined the company in 2003. ‘The past four years have been about setting a foundation to win and grow profitably in the future,’ he said. ‘We met those objectives in 2006.’

The firm has struggled in recent years, but Ovum analyst Phil Codling says the results mark an impressive turnaround for EDS.

‘There is no magic formula behind EDS’s return to form,’ he said. ‘Its key ingredients are the rationalisation of the cost base (including headcount reductions in expensive locations and growth offshore) and improved contract execution, helped by smarter partnering and a shift towards standardised processes and service templates.’

‘IT outsourcing has always delivered slow returns on investment and change, and these ingredients are long-term strategic projects under Jordan’s four-year-old recovery strategy, which is starting to pay off,’ said Codling.

EDS is predicting further growth this year, anticipating revenue will climb four per cent and operating margin will rise 6.3 per cent.

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