EDS on S&P CreditWatch negative

New York: Standard & Poor's (S&P) ratings services said that, after a preliminary assessment, it placed its A-2 short-term corporate credit and commercial paper ratings on Electronic Data Systems Corporation (EDS) on CreditWatch with negative implications.

The CreditWatch listing reflects the possibility that long-term ratings may be lowered two notches to BBB from A-, rather than one notch to BBB+ as previously expected, following a final review.

The Texas-based EDS provides broad-base technology services, including management consulting, systems integration, and systems outsourcing. It has about $5.4 billion of total rated debt.

"We will meet with management to assess strategic and operational issues and review the current business conditions and expectations for future performance and balance-sheet structure," says S&P.

S&P had placed its A- corporate credit and senior unsecured ratings on EDS on CreditWatch with negative implications on May 8, 2003, because of:

  1. Continued weak operational performance in each of EDS' major lines of business.
  2. Additional slippage in the seat-deployment schedule for the NMCI contract, which also included a decline in the average seat price and a delay in the crossover point to becoming cash-flow positive.
  3. The announced 'comprehensive strategic and operating review' of the company by the EDS management, which will not be completed until June 2003, and which may affect the outlook for 2003 and beyond for earnings and cash flow. Although the management''s targets include improved competitiveness, renewed growth, and a strengthened balance sheet, the costs, execution risks, and change to the business profile arising from the strategic review are unclear at this point.