IT outsourcing firm Perot Systems Corp’s net profit slumped 97% in its full year ended December 31, 2003.
Plano, Texas-based Perot reported a profit of only $2.45m for the full year, down from $78.3m in 2002, on revenue that grew 8.8% to $1.46bn. The sharp fall in profitability was mirrored by a slump in the fourth quarter, when Perot reported a 50% drop in net profit to $9.9m, on revenue that grew 19% to $393m.
Perot did not break out revenue across its divisions for the full year, however in the fourth quarter, the largest division IT solutions, which provides outsourcing services, grew 9% to $321.8m. Consulting declined 8% to $13.7m, but its new division government solutions grew 204% to $57.5m. Government solutions was boosted by Perot’s February 2003 acquisition of government sector services firm Soza & Company, which added $36m in revenue, while the company’s existing government division grew 13% to $21m.
During the full year Perot experienced a slowdown in growth within the healthcare market where it saw revenue increase 11% compared to the previous five years where it has seen an annual growth rate of 45%. New contract signings grew 26% in the year to $1.3bn, and total bookings including renewals and new accounts grew to $1.7bn.
Perot has grown acquisitively over the past year. It bought a small research house called Delphi Group in January, and prior to that in December, the company took full control of its Indian outsourcing subsidiary HCL Perot Systems after buying out its partner in the venture, HCL Technologies, for $105m in cash. HPS provides offshore contracting and application outsourcing services from India, and has over 2,000 software engineers. The HPS deal enabled Perot to improve its cash position during the full year, ending the period with $161m in cash, of which $50m came from HPS.
For the first quarter of 2004, Perot said it expects revenue to be between $400m and $415m, up between 1.8% and 5.6% on a sequential basis, with earnings of $0.13 and $0.16 per share. The company said it expects HPS to boost revenue by $25m, but it will not be accretive to earnings. Perot also pointed out that exiting from an under-performing contract and completing two contract extensions will result in an $8m decline in revenue and earnings impact of between $0.01 and $0.02 per share.
This article is based on material originally published by ComputerWire