Eds’ First Quarterly Loss In 19 Years Sparks Big Drop

Electronic Data Systems Corp. stock plunged after the company reported a disappointing first quarter and said it expects annual profits to be below Wall Street’s expectations. The company also said it may cut thousands of jobs.

EDS posted earnings of $194.1 million, or 40 cents a share, after the market closed Thursday. That was down 11 percent from $218.8 million, or 45 cents a share, in the same period last year. Analysts had expected the company to earn 56 cents per share.

The company also said earnings for the year will be between $2.30 to $2.35 per share - weaker than than analysts’ current estimates of $2.38. It said it is reviewing 7,000 to 9,000 of its 98,000 positions for possible elimination as part of an effort to rein in expenses.

Investors apparently shrugged off the company’s plans to cut expenses and focused on its decline in quarterly earnings and forecast for a weaker-than-expected year. The company’s shares dropped $9.50 Friday to close the week at $32.50.

“It was quite a shock yesterday. EDS hasn’t had a quarterly earnings decline year-over-year in 19 years. I think the stock is going to be under pressure in general for a few months until we see the evidence of the cost cutting they’re going to do,” said Steve McClellan of Merrill Lynch.

EDS, based in Plano, Texas, said it expects to take an unspecified charge possibly in the second quarter to pay for the job cuts. The cuts are part of an aggressive cost-cutting plan to help revive sagging profits. The company said it expects to conduct the review of its work force over the next 60 to 90 days.

The company indicated it was facing pressure from accelerating wages for computer professionals, said Greg Geiber, an analyst with Smith Barney. “That wage pressure in my opinion is likely to remain or get worse,” Geiber said.

EDS, which operates computer systems for big companies and governments, has struggled as personal computers and the Internet’s greater presence have bit into its business.

The drop in earnings for the quarter came despite a 7 percent rise in revenue to $3.59 billion from $3.37 billion.

“Obviously, I am not pleased with our earnings performance in the first quarter,” said Les Alberthal, president and chief executive.

Analysts caution that things may look grim for a while.

Some of the stocks that moved substantially or traded heavily Friday:

NYSE

Bell Atlantic, up $5.12-1/2 at $63.75 and Nynex, up $3.75 at $48.12-1/2.

The Justice Department cleared the way for the merger of Bell Atlantic and Nynex late Thursday, concluding that the combination of the two Baby Bells along the Eastern seaboard does not violate antitrust laws. It would be the second-biggest merger in U.S. history. The deal still must gain approval from the Federal Communications Commission.

Philip Morris, down $2.12-1/2 at $39.50, RJR Nabisco, down $2.75 at $28.87-1/2 and Loews, down $1.50 at $90.12-1/2.

Tobacco stocks fell after a federal judge decided ruled that the Food and Drug Administration has the right to regulate tobacco as a drug. The judge also ruled that federal law doesn’t allow it to restrict cigarette advertising and promotion.

NASDAQ

Ross Systems, down $1.43-3/4 at $2.

The Atlanta-based network-software maker reported a loss for its fiscal third quarter. The company blamed the results on weak sales for its healthcare products and on expenses in its European markets.

Northland Cranberries, down $2.87-1/2 at $11.56-1/4.

The Wisconsin Rapids, Wis.-based cranberry grower said late Thursday it expects to report fiscal 1997 earnings substantially lower than expected. Northland blamed the cancellation of its agreement to buy a juice bottler and distributor.