HP to take a hit on earnings over EDS V Sky lawsuit

8 Mar 2010

BSkyB’s landmark stg£200m judgment against EDS, now owned by HP, has forced the world’s largest technology company to revise its first-quarter earnings.

The revisions have resulted in a negative impact on HP’s first quarter net earnings of about US$73 million, or $0.03 per diluted share.

As a result of the revisions, the company’s net earnings for the quarter has been revised to US$2.25 billion and diluted earnings per share (EPS) has been revised to US$0.93 per share – down from net earnings of US$2.32 billion and diluted earnings per share of US$0.96 – as previously reported on 17 February.

HP said that EDS and one of its subsidiaries are defendants in litigation filed in the UK by Sky Subscribers Services Limited and British Sky Broadcasting Limited (BSkyB) in 2004 relating to a customer relationship management (CRM) project that was awarded to EDS in 2000.

At a court hearing held on 1 March 2010, the court ordered EDS to make an interim payment to BSkyB of stg£70 million, or about stg$112 million, which is in addition to an interim payment of £200 million, or about $320 million, that HP made voluntarily to BSkyB in February 2010.

Following that 1 March hearing, HP determined that it was appropriate to increase the contingency reserve. HP will continue to evaluate the reserve pending final resolution of the litigation.

The court’s 1 March order followed an earlier decision in January 2010 that dismissed the majority of BSkyB’s claims against EDS but found the company liable in certain areas. HP is seeking permission to appeal the ruling.

By John Kennedy

Photo: HP CEO Mark Hurd

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years