An ongoing review of its Navy Marine Corps Intranet (NMCI) contract has forced embattled services provider Electronic Data Systems Corp. (EDS (Profile, Products, Articles)) to again postpone its financial report for its third fiscal quarter, the company said Wednesday. EDS also announced its audit committee is conducting an internal investigation on a separate matter.

	ADVERTISEMENT

SPONSOR Messaging protection: Eliminating outbound message vulnerabilities for good Sponsored by Proofpoint SPONSOR InfoWorld's Dickerson discusses VoIP, SANs, Gigabit Ethernet and Security Sponsored by Cisco RELATED LINKS • EDS again postpones Q3 earnings report • Product Previews • BEA touts industry-specific solutions initiative • Professional services RSS feed  >> MORE IDG ENTERPRISE NETWORK • Why does a disk spin?  (TechWorld) • What the heck is security event management, anyway?  (TechWorld) • More App Development News...  (ComputerWorld) TOP STORIES • EDS again postpones Q3 earnings report • E-voting backers see successful election • Oracle's Shimp outlines product strategy • Top News RSS feed  >> MORE GOVERNMENT IT & POLICY • Cellular Firms End Dispute Over Airwaves • Political Spam Pervades Personal Computers • Police Arrest 28 in Online ID Theft Scams TOP SITE REFERRALS   E-voting problems cited as election gets under way (miscellaneous meanderings)   Hosted Content Management Systems (Strategic Agility)   SIGN UP FOR THE MAGAZINE FREE EMAIL NEWSLETTERS IT SOLUTION SEARCH

EDS had scheduled its third quarter report for October 25, but moved it to Wednesday, citing a need to complete a review of a possible asset impairment related to its problematic $8.8 billion Navy Marine Corps Intranet (NMCI) contract. The NMCI contract, awarded in 2000, has been plagued by delays and mismatched expectations and has drained significant cash from Plano, Texas-based EDS.

On Wednesday, EDS said it was once again postponing its earnings report because, although it is confirming the impairment, it hasn't completed the related review; at issue are the timing and the amount of the write-down.

EDS also disclosed on Wednesday that the company's audit committee has launched an internal accounting investigation of a matter unrelated to the NMCI issue. The audit committee began on October 27 an investigation centered on issues relating to quarterly bonus plan accruals in 2003 and 2004.

The investigation came as a recommendation from the company's external auditor KPMG LLP, which brought the issues to the attention of the audit committee. Independent counsel and accounting advisers are assisting the audit committee with this investigation, which revolves around money EDS sets aside and accrues as an expense for the purpose of bonus payments it later makes to employees, said EDS spokesman Kevin Lightfoot.

This investigation could lead to revisions of EDS' quarterly financial statements from 2003, but the company doesn't think they will affect its reported financial results for the full year of 2003, EDS said.

KPMG will not be able to complete its review of EDS' financial statements issue for its third quarter until the audit committee finishes its investigation, EDS said.

The audit committee investigation isn't expected to be finished before Nov. 9, which is EDS' deadline for filing its 10-Q form with the U.S. Securities Exchange Commission (SEC). EDS will either file the 10-Q without the results of the investigation, or, if the investigation is expected to end before Nov. 15, it will request an extension from the SEC, Lightfoot said.

EDS isn't at this point saying when it plans to issue its third-quarter financial report, Lightfoot said.

EDS doesn't expect that the accounting probe will have a "material adverse effect" on its finances or its credit and the company reaffirmed its previously-announced third-quarter and full-year financial forecasts. EDS expects third-quarter pro forma earnings of between $0.05 and $0.10 per share, and third-quarter revenue of between $4.9 billion to $5 billion. For the full year, it expects between $20 billion and $21 billion in revenue and pro forma earnings per share of between $0.20 and $0.30.

"We expect these accounting issues to be solved expeditiously and without any impact on our business and don't expect it to (disrupt) the significant improvement and progress we've made to our core business in the last 18 months," Lightfoot said.

EDS, which is on a quest to cut US$3 billion in costs, last week announced it is offering early retirement options to 17 percent of its U.S. employees, in the hopes that about half, or about 4,600 employees, will accept.

EDS is the world's second-largest IT services provider after IBM (Profile, Products, Articles) Corp.