A year to the day since it announced its 2006 third-quarter results, global IT services company EDS today revealed 6% year-over-year revenue growth and an 80% jump in earnings in the quarter ended Sept. 30. Total revenue in the third quarter reached $5.6 billion, up from $5.3 billion in the year-earlier period. On an organic basis, which is measured on constant currencies and excludes the impact of acquisitions and divestitures, revenue growth was 4%. Net income at the technology services company shot up to $225 million from $125 million in the like period last year. Part of the spike came from its workforce restructuring, which has shifted workload to lower-cost countries. At the end of the third quarter, 40,000 EDS employees were located in what officials termed "right-shore" locations; 25,000 of them in India. Of EDS' three main geographic regions, the smallest, Asia-Pacific, showed the most growth in the quarter, with revenue up 18% in constant currencies to $465 million. Growth was much more tepid in the Americas — up 2% to $2.63 billion — and in Europe, Middle East, and Africa, where the company managed a 3% improvement to $1.59 billion. EDS' revenue from the manufacturing sector, which accounts for 16% of its intake, rose nearly 6% to $872 million from $825 million a year ago. Darl Davidson, U.S. manufacturing industry leader, told Managing Automation that the pipeline for deals has grown by about 20%. A number of small contracts that EDS signed with manufacturing companies a few quarters ago have started to bear fruit, he said. "Those small projects turn into large deals," he said, when "we get in and get to know the client." Davidson said EDS has signed four new U.S. manufacturing companies this year, three in the third quarter alone. On Monday, the company will announce the details of a contract to provide Daimler with data center hosting, mid-range support data storage, and help with an IT transition plan for the company. The much-reported credit crunch hasn't affected the division. "So far, that really hasn't manifested itself into a reduced demand, at least in the U.S. manufacturing market," Davidson said. EDS officials today said they were sticking to earlier forecasts for the full year, when they expect to see $22 billion to $22.5 billion in revenue and earnings. On a conference call with analysts today, CEO Ron Rittenmeyer said revenue looks to be tracking toward the lower end of the guidance. Rittenmeyer said revenue in 2008 would improve just 2%, as the company copes with "higher than normal runoff." Earlier in the year, Verizon terminated a multiyear, multibillion-dollar contract with EDS, opting to bring in-house a sizable portion of its IT work, a decision that will have a large impact on EDS' future revenue. Asked by an analyst today about his characterization of 2008 as a transition year — the past few years have been transition years for the company as it restructures its business and slowly grows revenue — Rittenmeyer was frank about the challenges. In 2004, before he arrived, the company was in "pretty rough shape," he said. Had he arrived at that time, he would have predicted the same timelines for a return to strong growth. But "the market has changed pretty dramatically in the last couple of years," he said. "Indian players have arrived on the scene and been pretty darn credible, and we have to be realistic about that." It was only last year, he continued, that EDS "got its offshore energies in gear" in a way that would impact the bottom line. Other factors in EDS' struggles include a marked decline in prices in its legacy infrastructure business and Rittenmeyer's own transition into the role of chief executive. He admitted that when he took over the reins two and a half years ago, he needed to spend a year just getting a full understanding of what he called "a very complex business." Looking ahead, EDS sees the greatest near-term potential in the government sector, with financial services also expected to be a strong contributor. And the company will continue forward with a greater emphasis on its applications and business process outsourcing services. "We plan to change this revenue mix to increase focus in applications and [business process outsourcing], but primarily we are very focused on applications," he told analysts. Rittenmeyer expressed satisfaction with the growth so far, noting that in the third quarter the applications division grew sales by 9% to $1.6 billion, bringing its total contribution to the business to 31%. A big boost in that effort likely will come from a recently expanded relationship with SAP, officials said. "We forged a very important expanded relationship with SAP to help strengthen and build out our SAP practice," Rittenmeyer said. "SAP is providing us access to tools, methodology, recruiting, and pipeline. It will enable us to build our end-to-end consulting and implementation capabilities. This is a key to the applications strategy ... " On today's conference call, EDS also stretched its gaze beyond 2008 to 2009, when it says it expects 5% revenue growth.