IT services giant EDS Corp has delayed until November 3 its financial results for the third quarter, which were due to have been released Monday. It said the delay is the result of more problems with its US Navy contract.
Billed as a flagship deal when first announced by EDS about four years ago, the Navy Marines Corps Intranet contract has turned into a nightmare for the Plano, Texas-based company, with implementation problems and start-up costs sending a tide of red ink flowing through its results. As of August, the deal had cost EDS about $1 billion.
Earlier this month, the company secured modifications to the service level agreements on the contract, and seemed to have found a way of making the contract pay. At the time it did not reveal what the changes encompassed, or what they would mean for its financials.
Now the company is considering writing down the value of assets related to the deal, some $700 million. Excluding the impairment of these assets, the company said its earnings for the third quarter would be at the high end of guidance previously given, with revenue between $4.9 billion and $5.0 billion.
Such write-downs do not affect the company’s cash position, and are becoming almost an expected part of its financial releases. But the company’s inability to finally put the matter to bed is becoming an embarrassment that is continuing to chip away at its credibility with potential customers.
On Monday it also revealed that the total value of contract signings during the third quarter was $3.3 billion, less than the year-ago figure and ending a run of three quarters of year-on-year growth. It also now looks unlikely to hit its contract signings target of $17.5 billion for the year.