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20 Mar 2008
Moody's raises ratings of EDS to Baa3; Outlook is stable
Approximately $2.8 billion of debt affected
New York, March 20, 2008 -- Moody's Investors Service raised the senior unsecured rating of Electronic
Data Systems ("EDS") to Baa3 from Ba1, concluding a
review for possible upgrade initiated on December 11, 2007.
Concurrent with this action, Moody's is withdrawing the Corporate
Family Rating of Ba1. The outlook is stable.
The rating upgrade reflects the company's improved business execution,
financial performance, and good market position in the I/T outsourcing
sector. The action incorporates expectations that the company will
maintain its franchise breadth as one of the largest I/T services providers
worldwide, supported by its investments in lower cost geographies,
expansion of its higher margin and faster growing applications services
business, and ongoing cost reduction and productivity measures.
The upgrade also reflects the company's low financial leverage and
solid liquidity position.
The stable rating outlook reflects Moody's expectation that EDS will be
able to sustain its financial performance and that over the intermediate
term, contingent upon consistent execution, it appears reasonably
positioned to improve upon current performance levels. The outlook
also reflects the expectation that management will maintain its currently
modest financial leverage and solid liquidity as it focuses on improving
the consistent delivery of its business services and that it will not
undertake material acquisitions that could inject an element of instability
or integration challenges.
The rating also considers the periodic technical challenges faced by EDS
and its competitors in consistently executing increasingly complex integrated
I/T solutions as well as strong competition from established and fast
EDS also faces competitive challenges from the industry's ongoing
migration to offshore geographies, which, while providing
lower labor costs and potentially improved service offerings and delivery,
adds a deflationary element to revenue. This underscores the need
to further streamline costs and enhance automation capabilities in order
to offer competitive, higher value added services that can expand
profit margins. While EDS has made progress in these areas,
it, like other I/T companies, has additional work ahead of
it in order to offer a more integrated set of cost effective and value
added I/T solutions.
Finally, the rating incorporates the expectation that over time
the company will use some of currently strong financial flexibility by
either returning cash to shareholders and/or increasing financial leverage
to affect acquisitions that may engender some operational integration
challenges. For further details, refer to Moody's Credit
Opinion for Electronic Data Systems Corporation.
Ratings upgraded include the following:
Senior Unsecured Rating to Baa3 from Ba1
Senior unsecured shelf registration to (P) Baa3 from (P) Ba1
Subordinated shelf registration to (P) Ba1 from (P) Ba2
Preferred shelf registration rated (P) Ba2
Concurrently, Moody's has withdrawn the following ratings for EDS,
which are applicable to non investment grade issuers including :
Corporate Family Rating -- Ba1
Speculative Grade Liquidity Rating -- SGL-1
Headquartered in Plano, Texas, Electronic Data Systems Corporation
(EDS), with $22.1 billion in revenue and $1.49
billion in EBIT for the year ended December 2007, provides a range
of information technology (I/T) outsourcing and project services.
Richard J. Lane
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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