| HOME | NEWS ALERTS | SMK RECOMMENDATIONS |


S&P may cut Electronic Data Systems ratings
NEW YORK, May 8 - Standard & Poor's Ratings Services said today that it placed its 'A-' corporate credit and senior unsecured ratings on Electronic Data Systems Corp. on CreditWatch with negative implications and affirmed the company's A-2 commercial paper rating.

The CreditWatch listing reflects: --Continued weak operational performance in each of EDS' major lines of business; --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; --The announced "comprehensive strategic and operating review" of the company by EDS management, which will not be completed until June, may affect the outlook for 2003 and beyond for earnings and cash flow. Although 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.

"We had previously expected that the deployment and cash flow schedule for the NMCI contract would remain on track," said Standard & Poor's credit analyst Philip Schrank.

In addition, first-quarter operating margins were 5%, narrowed from 11% a year earlier, reflecting delivery issues in outsourcing, market pressures in the consulting sector, declines in higher margin discretionary IT services spending, and the new General Motors Corp. sector agreements.

Standard & Poor's 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.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.