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WorldCom Woes May Affect EDS

July 02, 2002|From Reuters

Electronic Data Systems Corp. said Monday its 2002 operating earnings could be hurt if WorldCom Inc. fails to pay its bills, sending shares of the No. 2 computer services company tumbling to lows not seen since October 1998.

Plano, Texas-based EDS--which competes in the market for computer services against IBM Corp.--said it expects WorldCom, one of its biggest customers, to account for $160 million to $175 million of its revenue in 2002. That equates to 3 cents to 4 cents a share in the third and fourth quarters this year.

EDS said it believed "WorldCom would continue to require substantial information technology services," but added that if WorldCom did not need the services and subsequently did not pay EDS, "these developments could be material to results of operations in 2002."

EDS also said it might have to write off about $90 million worth of assets--computer hardware and software dedicated to WorldCom--if the WorldCom contract falls through. EDS shares closed down more than 18%, or $6.70, at $30.45, less than half of their 52-week high of $72.

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