Analysts see few growth catalysts for EDS

NEW YORK, April 25 (Reuters) - Few catalysts may arise to spark growth and profits at Electronic Data Systems Corp (EDS.N: Quote, Profile, Research), Wall Street analysts said on Friday, a day after the technology outsourcing firm posted a sharp drop in quarterly profit.

While the results beat expectations in general, several analysts said they see core fundamentals for EDS as weak, amid "anemic" revenue growth.

"Longer term, shorter projects and intense competition from Indian providers are two adverse industry dynamics we do not see changing," said Jeffries analyst Joseph Vafi, in a client note. "Overall, we continue to see little in terms of catalysts to EDS's investment profile at this time."

The company reported on Thursday that first quarter 2008 net income of $62 million, or 12 cents per share, compared with $164 million, or 31 cents a share one year ago.

The steep decline came as a result of a large termination payment from Verizon Communications Inc (VZ.N: Quote, Profile, Research) in the first quarter of 2007.

First quarter 2008 revenue increased 3 percent to $5.37 billion from $5.22 billion in the year-ago quarter. The revenue would have decreased by 2 percent after the exclusion of the affects of currency fluctuations, acquisitions and divestitures.

The company said it signed $5.6 billion in contracts in the first quarter of 2008, up 66 percent from $3.4 billion in the year-ago quarter.

Looking ahead, it said it now sees full year 2008 revenue of $22.5 billion to $23 billion and adjusted earnings per share of $1.35 to $1.39.

The shares of EDS, the largest technology services provider after International Business Machines Corp (IBM.N: Quote, Profile, Research), were down 5.4 percent on Friday afternoon at $18.83, after rising on Thursday following the release of its earnings report.

So far this year, the stock is down about 4 percent on the New York Stock Exchange. (Reporting by Franklin Paul; Editing by Andre Grenon)