Why Eds Is Having Trouble Rebooting

When Electronic Data Systems Corp. officially split from parent General Motors Corp. on June 7, 1996, buttoned-down EDS employees cast aside a longstanding rule against drinking alcohol during the workday. Employees vividly recall the euphoria and popping champagne corks that marked the end of 12 years of ownership by the carmaker.

The party surely started too soon. Instead of soaring, the $14 billion computer-services giant has been stumbling. Once one of Wall Street's high-tech darlings, EDS has had a string of earnings disappointments, sending its stock diving 41%, to $37 9/16 a share, from a high of more than $63 last October. What's more, results so far this year have raised concern about the company's financial controls and long-term growth prospects: Analysts estimate that revenue for 1997 will grow an anemic 3%, while the information-technology markets that EDS serves grow at a robust 14%. Next year, analysts project revenue up 9%, still lagging behind the industry.