UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2007~~2008

Commission File No. 01-11779

ELECTRONIC DATA SYSTEMS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

75-2548221
(I.R.S. Employer
Identification No.)

5400 Legacy Drive, Plano Texas 75024-3199
(Address of principal executive offices including ZIP code)

Registrant's telephone number, including area code: (972) 604-6000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. Large accelerated filer X Accelerated Filer Non-accelerated filer Smaller reporting company ____.

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes No X .

As of ~~October~~April 3125, ~~2007~~2008, there were ~~512~~502,~~091~~601,~~999~~372 outstanding shares of the registrant's Common Stock, $.01 par value per share.

INDEX

			Page No.
Part I - Financial Information (Unaudited)
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Statements of Operations	2
		Unaudited Condensed Consolidated Statements of Income	2
		Unaudited Condensed Consolidated Balance Sheets	3
		Unaudited Condensed Consolidated Statements of Cash Flows	4
		Notes to Unaudited Condensed Consolidated Financial Statements	5
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1511
	Item 4.	Controls and Procedures	2317
Part II - Other Information
	Item 1.	Legal Proceedings	2418
	Item 1A.	Risk Factors	2418
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2418
	Item 6.	Exhibits	2418
Signatures			2519

PART I

ITEM 1. FINANCIAL STATEMENTS

ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~ INCOME

(in millions, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended
	2007		2006		2007		2006
	March 31,
Revenues	$	5,629	$	5,292	$	16,302	$	15,564
	2008		2007
Costs and expenses
Revenues	$	5,365	$	5,224
Cost of revenues	4,791		4,625		14,044		13,743
Costs and expenses
Selling, general and administrative	476		453		1,398		1,379
Cost of revenues	4,810		4,523
Other operating income	-		(1)		(1)		(6)
Selling, general and administrative	458		436
Total costs and expenses, net	5,~~267~~268		54,~~077~~959		~~15,441~~		~~15,116~~
Operating income	~~362~~97		~~215~~265		~~861~~		~~448~~
Interest expense	(5641)		(5857)		~~(169)~~		~~(181)~~
Interest income and other, net	5247		5950		~~126~~		~~134~~
Other income (expense), net	(4)		1		(43)		(47)
Other income (expense)	6		(7)
Income from continuing operations before income taxes	~~358~~103		~~216~~258		~~818~~		~~401~~
Provision for income taxes	~~133~~40		8693		~~284~~		~~129~~
Income from continuing operations	~~225~~63		~~130~~165		~~534~~		~~272~~
Loss from discontinued operations, net of income taxes	-(1)		(51)		~~(7)~~		~~(19)~~
Net income	$	~~225~~62	$	~~125~~164	$	~~527~~	$	~~253~~
Basic earnings per share of common stock
Income from continuing operations	$	0.4412	$	0.2532	$	~~1.04~~	$	~~0.53~~
Loss from discontinued operations	-		~~(0.01)~~-		~~(0.01)~~		~~(0.04)~~
Net income	$	0.4412	$	0.2432	$	~~1.03~~	$	~~0.49~~
Diluted earnings per share of common stock
Income from continuing operations	$	0.4212	$	0.2531	$	~~1.01~~	$	~~0.52~~
Loss from discontinued operations	-		~~(0.01)~~-		~~(0.01)~~		~~(0.04)~~
Net income	$	0.4212	$	0.2431	$	~~1.00~~	$	~~0.48~~
Cash dividends per share	$	0.05	$	0.05	$	~~0.15~~	$	~~0.15~~

See accompanying notes to unaudited condensed consolidated financial statements.

ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)

	September 30,		December 31,
	March 31,		December 31,
	2007		2006
	2008		2007
ASSETS
Current assets
Cash and cash equivalents	$	32,~~062~~800	$	23,~~972~~139
Marketable securities	4613		4555
Accounts receivable, net	3,~~912~~796		3,~~647~~603
Prepaids and other	~~880~~959		~~866~~958
Deferred income taxes	~~627~~677		~~727~~690
Total current assets	8,~~527~~245		8,~~257~~445
Property and equipment, net	2,~~435~~420		2,~~179~~489
Deferred contract costs, net	~~985~~1,085		~~807~~984
Investments and other assets	~~665~~954		~~636~~1,099
Goodwill	45,~~659~~141		45,~~365~~092
Other intangible assets, net	~~829~~902		~~749~~929
Deferred income taxes	~~826~~190		~~961~~186
Total assets	$	18,~~926~~937	$	1719,~~954~~224
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	~~689~~628	$	~~677~~605
Accrued liabilities	2,~~627~~490		2,~~689~~616
Deferred revenue	1,~~535~~442		1,~~669~~473
Income taxes	~~148~~48		7254
Current portion of long-term debt	~~155~~160		~~127~~168
Total current liabilities	54,~~154~~768		54,~~234~~916
Pension benefit liability	1,~~598~~023		~~1,404~~989
Long-term debt, less current portion	3,~~170~~119		23,~~965~~209
Minority interests and other long-term liabilities	~~427~~409		~~455~~419
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value; authorized 200,000,000 shares; none issued	-		-
Common stock, $.01 par value; authorized 2,000,000,000 shares; 531,975,655 shares issued at September 30, 2007 and December 31, 2006	5		5
Common stock, $.01 par value; authorized 2,000,000,000 shares; 531,975,655 shares issued at March 31, 2008 and December 31, 2007	5		5
Additional paid-in capital	3,~~070~~041		23,~~973~~097
Retained earnings	6,~~002~~161		56,~~630~~158
Accumulated other comprehensive income (loss)	109		(182)
Accumulated other comprehensive income	1,150		1,070
Treasury stock, at cost, 20,332,093 shares at September 30, 2007 and 17,658,428 shares at December 31, 2006	(609)		(530)
Treasury stock, at cost, 29,835,492 shares at March 31, 2008 and 22,113,129 shares at December 31, 2007	(739)		(639)
Total shareholders' equity	89,~~577~~618		79,~~896~~691
Total liabilities and shareholders' equity	$	18,~~926~~937	$	1719,~~954~~224

See accompanying notes to unaudited condensed consolidated financial statements.

ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2007		2006
	2008		2007
Cash Flows from Operating Activities
Net income	$	~~527~~62	$	~~253~~164
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization and deferred cost charges	~~1,058~~383		~~973~~330
Deferred compensation	~~122~~40		~~175~~30
Other long-lived asset write-downs	14		19-
Other	6547		~~(34)~~25
Changes in operating assets and liabilities, net of effects of acquired companies:
Accounts receivable	(50104)		23(135)
Prepaids and other	~~(201)~~69		(~~164~~123)
Deferred contract costs	(~~288~~150)		(~~172~~87)
Accounts payable and accrued liabilities	(5988)		81(175)
Deferred revenue	(~~189~~43)		~~203~~135
Income taxes	~~197~~31		~~(161)~~78
Total adjustments	~~656~~189		~~943~~78
Net cash provided by operating activities	~~1,183~~251		~~1,196~~242
Cash Flows from Investing Activities
Proceeds from sales of marketable securities	-43		~~1,985~~-
Proceeds from investments and other assets	6330		~~216~~43
Net proceeds (payments) from divested assets and non-marketable equity securities	53		(11)
Net proceeds from divested assets and non-marketable equity securities	9		53
Net proceeds from real estate sales	28		49
Payments for purchases of property and equipment	(229)		(158)
Payments for purchases of property and equipment	(531)		(510)
Payments for acquisitions, net of cash acquired, and non-marketable equity securities	(6)		(1)
Payments for investments and other assets	-		(37)
Payments for purchases of software and other intangibles	(131)		(106)
Payments for acquisitions, net of cash acquired, and non-marketable equity securities	(40)		(352)
Payments for purchases of marketable securities	-		(1)
Payments for purchases of software and other intangibles	(313)		(338)
Other	2		3
Payments for purchases of marketable securities	(3)		(1,483)
Net cash used in investing activities	(282)		(167)
Other	24		28
Net cash used in investing activities	(719)		(453)
Cash Flows from Financing Activities
Proceeds from long-term debt	5-		-3
Payments on long-term debt	(101)		(~~209~~10)
Capital lease payments	(~~125~~49)		(~~109~~32)
Purchase of treasury stock	(~~334~~213)		(~~502~~285)
Employee stock transactions	~~142~~(18)		~~203~~77
Dividends paid	(7725)		(7826)
Other	132		145
Net cash used in financing activities	(~~386~~304)		(~~681~~268)
Effect of exchange rate changes on cash and cash equivalents	12(4)		(1)
Net increase in cash and cash equivalents	90		61
Net decrease in cash and cash equivalents	(339)		(192)
Cash and cash equivalents at beginning of period	23,~~972~~139		12,~~899~~972
Cash and cash equivalents at end of period	$	32,~~062~~800	$	12,~~960~~780

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Electronic Data Systems Corporation ("EDS" or the "Company") have been prepared in accordance with United States generally accepted accounting ~~principles~~ principles ("GAAP") for interim financial information. In the opinion of management, all material adjustments, which are of a normal recurring nature and necessary for a fair presentation, have been included. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. The information contained herein should be read in conjunction with the Company's Annual Report on Form 10‑K for the year ended December 31, ~~2006~~2007.

The unaudited condensed consolidated financial statements include the accounts of EDS and its controlled subsidiaries. The Company defines control as a non-shared, non-temporary ability to make decisions that enable it to guide the ongoing activities of a subsidiary and the ability to use that power to increase the benefits or limit the losses from the activities of that subsidiary. Subsidiaries in which other shareholders effectively participate in significant operating decisions through voting or contractual rights are not considered controlled subsidiaries. The Company's investments in entities it does not control, but in which it has the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Under such method, the Company recognizes its share of the subsidiaries' income (loss) in other income (expense). If EDS is the primary beneficiary of variable interest entities, the unaudited condensed consolidated financial statements include the accounts of such entities. No variable interest entities were consolidated during the periods presented.

The preparation of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Areas in which significant judgments and estimates are used include, but are not limited to, cost estimation for Construct Service elements, projected cash flows associated with recoverability of deferred contract costs, contract concessions and long-lived assets, liabilities associated with pensions, performance guarantees and uncertain tax positions, recoverability of deferred tax assets, receivables collectibility, and loss accruals for litigation, exclusive of legal fees which are expensed as services are received. It is reasonably possible that events and circumstances could occur in the near term that would cause such estimates to change in a manner that would be material to the unaudited condensed consolidated financial statements.

NOTE 2: ~~EARNINGS~~ACCOUNTING ~~PER SHARE~~CHANGE

The Company ~~weighted-average~~adopted ~~number~~Financial ofAccounting ~~shares~~Standards ~~outstanding~~Board ~~used~~("FASB") toStatement No. ~~compute~~157, ~~basic~~Fair Value Measurements, for its financial assets and ~~diluted~~liabilities effective ~~earnings~~January ~~per~~1, ~~share~~2008. ~~are~~This asstandard ~~follows~~defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Company elected to defer the ~~three~~provisions of Statement No. 157 for its nonfinancial assets and ~~six~~liabilities. ~~months~~Such ~~ended~~assets ~~September~~and 30liabilities, ~~2007~~which include the Company's noncurrent assets, long-term debt, minority interest and ~~2006~~other ~~(in~~long-term liabilities, ~~millions):~~will be subject to the provisions of Statement No. 157 effective January 1, 2009.

	2007	2006
For the three months ended September 30:
Basic earnings per share	511	517
Diluted earnings per share	541	546
For the nine months ended September 30:
Basic earnings per share	512	519
Diluted earnings per share	543	529

Statement No. 157 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability. Such inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived principally from or corroborated by observable market data by correlation or other means. Level 3 inputs are unobservable inputs for the asset or liability. Such inputs are used to measure fair value when observable inputs are not available.

~~The Company has contingently convertible debt that is~~ ~~excluded from the computation of diluted earnings per share when the result is~~Following ~~antidilutive. If the result~~ is ~~dilutive,~~a ~~net~~summary ~~income and weighted-average shares outstanding are adjusted as if conversion took place on the first day~~ of the ~~reporting~~ ~~period.~~Company's ~~The~~financial ~~effect~~assets ~~of this debt was dilutive for the three~~ and ~~nine~~liabilities ~~months ended~~measured ~~September~~at ~~30, 2007. Accordingly, approximately $5 million of tax-effected~~fair ~~interest~~value ~~was~~on ~~added~~a torecurring ~~income~~basis ~~from~~as ~~continuing operations and net income and 20 million shares were added to weighted-average shares outstanding in the computation~~ of ~~diluted earnings per share for the three months ended September 30~~March 31, ~~2007.~~2008 ~~Approximately $14 million of tax-effected interest was added to income from continuing operations and net income and 20 million shares were added to weighted-average shares outstanding~~ (in ~~the computation of diluted earnings per share for the nine months ended September 30, 2007.~~millions):

			Fair Value Hierarchy
	Balance		Level 1		Level 2		Level 3
Available-for-sale marketable securities	$	13	$	13	$	-	$	-
Foreign currency forward contracts, net liability	(4)		-		(4)		-
Interest rate swap agreements, net asset	15		-		15		-
Total	$	24	$	13	$	11	$	-

~~Securities that were outstanding but were not included in the~~ ~~computation of diluted earnings per share because their effect was antidilutive are as follows for the three and nine months ended September 30, 2007 and 2006 (in millions):~~ 5

	2007	2006
For the three months ended September 30:
Common stock options and warrants	13	16
Convertible debt	-	-
For the nine months ended September 30:
Common stock options and warrants	12	16
Convertible debt	-	20

NOTE 3: EARNINGS PER SHARE

~~NOTE~~ The weighted-average ~~3: PROPERTY~~number ~~AND~~of ~~EQUIPMENT~~shares outstanding used to compute basic and diluted earnings per share are as follows for the three months ended March 31, 2008 and 2007 (in millions):

Property and equipment is stated net of accumulated depreciation of $4.8 billion and $4.4 billion at September 30, 2007 and December 31, 2006, respectively. Depreciation expense for the three months ended September 30, 2007 and 2006 was $208 million and $194 million, respectively. Depreciation expense for the nine months ended September 30, 2007 and 2006 was $581 million and $561 million, respectively.

	2008	2007
Basic earnings per share	506	514
Diluted earnings per share	513	545

~~NOTE~~ The Company ~~4: DEFERRED~~has ~~CONTRACT~~contingently ~~COSTS~~convertible debt that is excluded from the computation of diluted earnings per share when the result is antidilutive. If the result is dilutive, net income and weighted-average shares outstanding are adjusted as if conversion took place on the first day of the reporting period. The effect of this debt was dilutive for the three months ended March 31, 2007. Accordingly, approximately $5 million of tax-effected interest was added to income from continuing operations and net income and 20 million shares were added to weighted-average shares outstanding in the computation of diluted earnings per share.

~~At September 30, 2007, the Company had net deferred contract~~ ~~and set-up costs of $985 million, of which approximately $580 million related~~Securities tothat ~~contracts~~were ~~with~~outstanding ~~active~~but ~~construct~~were ~~activities.~~not ~~The~~included ~~Company normally has between 20 to 25 active construct contracts with deferred costs~~ in ~~excess of $1 million. Some of~~ the ~~Company's~~computation ~~client contracts require significant investment in the early stages which is expected to be recovered through billings over the life~~ of ~~the respective contracts. These contracts often involve the~~diluted ~~construction~~earnings ofper ~~new~~share ~~computer~~because ~~systems~~their ~~and~~effect ~~communications~~was ~~networks~~antidilutive and the development and deployment of new technologies. Substantial performance risk exists in each contract with these characteristics, and some or all elements of service delivery under these contracts are ~~dependent~~as ~~upon~~follows ~~successful~~for ~~completion of~~ the ~~development, construction and deployment phases. Some of these contracts~~ ~~have~~three ~~experienced~~months ~~delays~~ended inMarch ~~their~~31, ~~development~~2008 and ~~construction~~2007 ~~phases, and certain milestones have been missed. It is reasonably possible that deferred costs associated with one or more of these contracts could become impaired due to changes~~ (in ~~estimates of future contract cash flows.~~millions):

NOTE 5: INVESTMENTS AND OTHER ASSETS

	2008	2007
Common stock options and warrants	26	12
Restricted stock units	3	-
Convertible debt	20	-

~~The~~NOTE ~~Company~~4: PROPERTY ~~holds~~AND interests in various equipment leases financed with non-recourse borrowings at lease inception accounted for as leveraged leases. The Company also holds an equity interest in a partnership which holds leveraged aircraft lease investments. The Company accounts for its interest in the partnership under the equity method. The carrying amount of the Company's remaining equity interest in the partnership was $28 million at both September 30, 2007 and December 31, 2006. The Company's ability to recover its remaining investment in the partnership is dependent upon the continued payment of rentals by the lessees and the realization of expected future aircraft values. In the event such lessees are relieved from their obligation to pay such rentals as a result of bankruptcy, the investment in the partnership would be partially or wholly impaired. EQUIPMENT

~~Investments~~ Property and in equipment ~~for lease~~ is ~~comprised~~stated ~~of equipment to be leased to clients under long-term IT contracts and~~ net ~~investment in leased equipment associated with such contracts. On March 24, 2006, the Company and the Department~~ of ~~the~~accumulated ~~Navy~~depreciation ~~reached an agreement on the modification~~ of ~~the Navy Marine Corps Intranet ("NMCI") contract which, among other things, extended the contract term from 2007 to 2010 and defined the economic lives of certain desktop and infrastructure assets~~$4.9 Asbillion a result of the contract modification which changed lease payment terms, the Company recognized sales-type capital lease revenue of $116 million in the three months ended March 31, 2006 associated with certain assets previously accounted for as operating leases, and ~~certain assets previously accounted for as capital leases with an aggregate net investment balance of~~ $~~113 million are now being accounted for as operating leases~~4. ~~The net investment in leased equipment associated with the NMCI~~7 ~~contract~~billion ~~was $306 million and $295 million~~ at ~~September~~March 3031, ~~2007~~2008 and December 31, ~~2006~~2007, respectively. Depreciation ~~Future~~expense ~~minimum~~for ~~lease payments to be received under~~ the ~~NMCI~~ ~~contract~~three ~~were~~months ~~$321~~ended ~~million~~March ~~and $314 million at September 30, 2007 and December~~ 31, ~~2006,~~2008 ~~respectively. The unguaranteed residual values accruing to the Company were $10 million~~ and $32007 ~~million, and unearned interest income related to these leases~~ was $25 203 million and $22181 million ~~at September 30~~, ~~2007 and December 31, 2006,~~ respectively. The net lease receivable balance is classified as components of prepaids and other and investments and other assets in the consolidated balance sheets. Future minimum lease payments to be received were as follows: 2007 - $50 million; 2008 - $155 million; 2009 - $85 million; 2010 - $31 million.

6NOTE 5: DEFERRED CONTRACT COSTS

~~During~~ Some of the ~~third~~Company's ~~quarter~~client ofcontracts ~~2006,~~require ~~the~~significant ~~Company~~investment ~~sold~~in ~~land~~the ~~held~~early ~~for~~stages ~~development~~which is expected to abe ~~real~~recovered ~~estate~~through ~~joint~~billings ~~venture~~over ~~for~~the ~~cash~~life of the respective contracts. These contracts often involve the construction of new computer systems and acommunications ~~minority~~networks ~~equity~~and the development and deployment ~~interest~~of new technologies. Substantial performance risk exists in each contract with these characteristics, and some or all elements of service delivery under these contracts are dependent upon successful completion of the ~~joint~~development, construction ~~venture~~and deployment phases. ~~Net~~At ~~proceeds~~March ~~from~~31, 2008, approximately $650 million of the ~~sale~~Company's ~~were~~net ~~$49~~deferred ~~million which~~construct ~~was~~and ~~received~~set-up incosts ~~September~~related ~~2006~~to contracts with active construct activities. The Company ~~recognized~~has aapproximately ~~net~~25 ~~gain~~active construct contracts with deferred costs in excess of $8 1 million. onSome ~~the~~of ~~sale~~these contracts ~~which~~have isexperienced ~~included~~delays in ~~other~~their ~~income~~development ~~(expense)~~and inconstruction ~~the~~phases, ~~unaudited~~and ~~condensed~~certain ~~consolidated~~milestones ~~statements~~have ofbeen ~~operations~~missed. ~~for~~It ~~the~~is ~~three~~reasonably ~~and~~possible that ~~nine~~deferred ~~months~~costs ~~ended~~associated ~~September~~with ~~30,~~one ~~2006~~or more of these contracts could become impaired due to changes in estimates of future contract cash flows.

NOTE 6: ~~COMPREHENSIVE~~INVESTMENTS ~~INCOME (LOSS)~~ AND ~~SHAREHOLDERS' EQUITY~~OTHER ASSETS

~~Comprehensive~~ The Company ~~income~~holds ~~was~~interests ~~$335~~in ~~million~~various ~~and~~equipment ~~$169~~leases ~~million~~financed ~~for~~with non-recourse ~~the~~borrowings ~~three~~at ~~months~~lease ~~ended~~inception ~~September~~accounted ~~30,~~for ~~2007~~as ~~and~~leveraged ~~2006, respectively~~leases. ~~Comprehensive income~~The ~~was~~Company ~~$818~~also holds ~~million~~an ~~and~~equity ~~$483~~interest ~~million~~in ~~for~~a ~~the~~partnership ~~nine~~which ~~months~~holds ~~ended~~leveraged ~~September 30,~~aircraft ~~2007 and 2006, respectively~~lease investments. The ~~difference~~Company ~~between~~accounts ~~comprehensive~~for ~~income~~its ~~and net~~interest ~~income~~in ~~for~~the partnership under the equity ~~three~~method. ~~and~~The ~~nine~~carrying ~~months~~amount ~~ended~~of ~~September~~the ~~30,~~Company's ~~2007~~remaining ~~and~~equity ~~2006~~interest ~~resulted~~in ~~primarily~~the ~~from~~partnership ~~foreign~~was ~~currency~~$28 ~~translation~~million ~~adjustments~~at December 31, 2007. During the ~~nine~~ three months ended ~~September~~March 3031, ~~2006~~2008, ~~cumulative~~the ~~translation~~Company ~~adjustments~~received ~~of approximately~~a ~~$21~~cash ~~million~~distribution ~~were transferred~~ from ~~accumulated other comprehensive~~the ~~loss~~partnership towhich ~~net~~reduced ~~income~~the ~~due~~carrying toamount ~~the~~of ~~divestiture~~its ofinvestment ~~A.T.~~to ~~Kearney~~$7 ~~(see~~million at ~~Note~~March ~~13)~~31, 2008.

In Investments in ~~April~~equipment ~~2007,~~for ~~the~~lease ~~Company~~is ~~completed~~comprised ~~the~~of $1equipment ~~billion~~to ~~share~~be leased to clients under ~~repurchase~~long-term ~~program~~IT ~~announced~~contracts and net investment in ~~February~~leased ~~2006~~equipment associated with such contracts. The ~~Company~~net ~~purchased~~investment anin leased equipment associated with the NMCI ~~aggregate~~contract ofwas ~~37.6~~$134 million ~~shares~~and of$288 ~~common~~million ~~stock~~ at aMarch ~~cost~~31, of2008 and December 31, 2007, respectively. During the three months ended March 31, 2008, the Company sold approximately $1150 ~~billion~~million in lease receivables associated with the NMCI contract (~~excluding~~see ~~transaction~~Note ~~costs~~12). ~~under~~Proceeds ~~this~~from ~~program~~the sale are included in net cash from operating activities in the consolidated statement of cash flows as a change in prepaids and other current assets. Future minimum lease payments to be

~~In connection with its employee stock incentive plans, the~~ Company issued 8.8 million shares of treasury stock at a cost of $238 million during the nine months ended September 30, 2007. The difference between the cost and fair value at the date of issuance of such shares has been recognized as a charge to retained earnings of $61 million during the nine months ended September 30, 2007. 6

~~NOTE~~ received under 7the NMCI contract were $131 million and $301 million at March 31, 2008 and December 31, 2007, respectively. The unguaranteed residual values accruing to the Company were $15 million and $13 million, and unearned interest income related to these leases was $12 million and $26 million at March 31, 2008 and December 31, 2007, respectively. The net lease receivable balance is classified as components of prepaids and other and investments and other assets in the consolidated balance sheets. Future minimum lease payments to be received were as follows: ~~STOCK~~ 2008 -~~BASED~~ ~~COMPENSATION~~$83 million; 2009 - $46 million; 2010 - $2 million.

~~Stock Options~~NOTE 7: COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY

~~During March 2007 and 2006, the Company issued options to~~ ~~purchase approximately 2.3 million and 1.6 million shares, respectively, of~~Comprehensive ~~common~~income stock with fair values of $8.43 and $8.84, respectively, per option. Options issued during March 2007 and 2006 are scheduled to vest in February 2010 and 2009, respectively. Total compensation expense for stock options was $8 ~~million (~~$5142 million ~~net of tax)~~ and $25198 million ~~($17 million net of tax), respectively,~~ for the three months ended ~~September~~March 3031, ~~2007 and 2006. Total~~ ~~compensation~~2008 ~~expense for stock options was $28 million ($20 million net of tax)~~ and ~~$105 million ($70 million net of tax)~~2007, respectively,. ~~for~~The ~~the~~difference ~~nine~~between ~~months ended~~comprehensive ~~September~~income ~~30, 2007~~ and net ~~2006.~~income ~~Total compensation expense~~ for ~~stock options for~~ the ~~nine~~three ~~months~~ ended ~~September~~March 3031, ~~2006~~2008 ~~includes~~and ~~$16~~2007 ~~million~~resulted ~~($10~~primarily ~~million~~from ~~net~~foreign ofcurrency ~~tax)~~translation ~~reported in loss from discontinued operations~~adjustments.

~~Certain~~ In December ~~stock~~2007, ~~option~~the ~~grants~~Company's ~~contain~~Board ~~market~~of ~~conditions~~Directors ~~that~~authorized the Company to ~~accelerate~~repurchase ~~vesting~~up ifto ~~the~~$1 ~~Company's~~billion of its outstanding common stock ~~reaches~~over ~~certain~~the ~~target~~next ~~prices~~18 months in open market purchases or privately negotiated transactions. During the ~~second~~three ~~quarter~~months ofended ~~2007~~March 31, ~~approximately~~2008, 3the Company repurchased 11.35 million ~~outstanding~~shares in ~~stock~~the ~~options became~~open ~~exercisable~~market ~~when~~at ~~the~~a ~~Company's~~cost ~~stock~~of ~~reached~~$213 ~~certain~~million ~~target~~in ~~prices,~~connection with this share ~~accelerating~~repurchase ~~the~~authorization. ~~recognition~~In ofApril ~~compensation~~2007, ~~expense~~the ofCompany ~~approximately~~completed the $81 billion ~~million~~share repurchase program announced in February 2006. During the ~~first~~three ~~quarter~~months ended ofMarch ~~2006~~31, ~~approximately~~2007, 7the Company purchased 10.64 million ~~outstanding~~ ~~stock~~shares ~~options~~of ~~became~~its ~~exercisable~~common stock ~~when~~in the ~~Company's~~open ~~stock~~market ~~reached certain~~at ~~target~~a ~~prices,~~cost ~~accelerating~~of ~~the~~$289 ~~recognition~~million ofin ~~compensation~~connection ~~expense~~with ofthis ~~approximately~~share ~~$25~~repurchase ~~million~~authorization.

As In connection ofwith ~~September~~its ~~30,~~employee ~~2007~~stock incentive plans, ~~options~~the toCompany ~~purchase~~issued 283.~~5 million~~8 million shares of ~~common~~treasury stock ~~were~~at ~~outstanding with~~ a ~~weighted-average~~cost ~~exercise price~~ of $29113 ~~per~~million ~~share,~~during ofthe ~~which~~three months ~~options~~ended toMarch ~~purchase~~31, 222008.4 ~~million~~The ~~shares~~difference ~~were~~between ~~exercisable with~~the acost ~~weighted-average~~and ~~exercise~~fair ~~price~~value ~~of $29 per share. At December 31,~~at ~~2006,~~the ~~options~~date toof ~~purchase~~issuance ~~35.0~~of ~~million~~such shares ofhas ~~common~~been ~~stock~~recognized ~~were~~as ~~outstanding with~~ a ~~weighted-average~~charge ~~exercise~~to ~~price~~retained earnings of $2834 ~~per share, of which 23.0~~ million ~~shares~~ ~~were~~during ~~exercisable~~the ~~with~~three amonths ~~weighted-average~~ended ~~exercise~~March 31, ~~price of $30 per share~~2008.

~~The~~NOTE ~~Company~~8: STOCK-BASED receives a tax deduction equal to the intrinsic value of a stock option on the date of exercise. Cash retained as a result of this tax deductibility is reported as other cash flows from financing activities in the unaudited condensed consolidated statements of cash flows.COMPENSATION

~~The~~ During the first quarters of 2008 and 2007, the Company ~~plans~~issued options to ~~utilize~~purchase approximately ~~treasury~~3.5 million and 2.3 million shares, ~~acquired~~respectively, ~~under~~of common stock with fair values of $4.15 and $8.43, respectively, per option. Options issued during the ~~repurchase~~first ~~program~~quarters ~~authorized~~of 2008 and 2007 are scheduled to vest in February 2011 ~~2006~~and February 2010, respectively. Total compensation expense for stock options was $5 million (~~see~~$3 ~~Note~~million 6net of tax benefit) toand ~~satisfy~~$6 million ($4 million ~~future~~net ~~share~~of ~~option~~tax ~~exercises~~benefit), ~~and~~respectively, for the ~~vesting~~three ofmonths ~~restricted~~ended ~~stock~~March ~~awards~~31, 2008 and 2007. The Company ~~utilized~~also ~~treasury~~wrote ~~shares~~off ~~and~~deferred ~~newly~~tax ~~issued~~assets ~~shares~~related to ~~satisfy~~certain stock ~~share~~options that expired or were exercised during the three months ended ~~option~~March ~~exercises~~31, 2008 and ~~the~~2007, ~~vesting~~resulting ofin ~~restricted~~deferred ~~stock~~tax ~~awards~~expense ~~prior~~of to$3 ~~the February~~million ~~2006~~and ~~authorization~~$1 million, respectively.

7 As of March 31, 2008, options to purchase 27 million shares of common stock were outstanding with a weighted-average exercise price of $26 per share, of which options to purchase 19 million shares were exercisable with a weighted-average exercise price of $26 per share. At December 31, 2007, options to purchase 28 million shares of common stock were outstanding with a weighted-average exercise price of $28 per share, of which 22 million shares were exercisable with a weighted-average exercise price of $29 per share.

During the first quarters of 2008 and 2007, the Company issued approximately 9.9 ~~Restricted~~million and 8.2 million restricted stock units, respectively, with ~~Stock~~weighted-average ~~Units~~fair values of $18.25 and $25.51, respectively, per unit. Approximately 4 million of the restricted stock units issued in 2008 are performance-based awards that will vest in 2011, and approximately 6 million are time-vesting awards that will vest ratably through 2011. Regularly scheduled vesting will occur in February 2010 for substantially all restricted stock units issued during the first quarter of 2007. Total compensation expense for restricted stock units was $33 million ($22 million net of tax) and $25 million ($17 million net of tax), respectively, for the three months ended March 31, 2008 and 2007.

~~The Company grants time-vesting and performance-based~~ restricted stock units to certain employees. The number of performance-based restricted stock units that will vest is dependent upon the Company's achievement of certain financial performance metrics over a three-year performance period and the employee's continued employment. The Company estimates the number of units that will vest based on the Company's financial performance since inception of the performance period and current expectations of the Company's future financial performance over the remainder of the performance period. Compensation expense for units is recorded on a straight-line basis over the vesting period. Cumulative compensation expense for each grant is adjusted in the period in which there is a change in the estimated number of units that will vest.7

~~During~~NOTE ~~March 2007 and 2006, the Company issued approximately 8.2 million and 5.~~9: SEGMENT million restricted stock units, respectively, with weighted-average fair values of $25.51 and $25.45, respectively, per unit. Regularly scheduled vesting will occur in 2010 and 2009, respectively, for substantially all restricted stock units issued during March 2007 and 2006. Total compensation expense for restricted stock units was $31 million ($20 million net of tax) and $25 million ($16 million net of tax), respectively, for the three months ended September 30, 2007 and 2006. Total compensation expense for restricted stock units was $91 million ($60 million net of tax) and $70 million ($48 million net of tax), respectively, for the nine months ended September 30, 2007 and 2006. Total compensation expense for restricted stock units for the nine months ended September 30, 2006 includes $4 million ($3 million net of tax) reported in loss from discontinued operations.INFORMATION

~~A.T.~~Following ~~Kearney~~is a summary of certain financial information by reportable segment as of and for the three months ended March 31, 2008 and 2007 (in millions):

As a result of the divestiture of A.T. Kearney in January 2006 (see Note 13), vesting was accelerated for options to purchase 2.1 million shares of common stock and 0.3 million restricted stock units, and unvested options to purchase 0.2 million shares were forfeited. This accelerated vesting resulted in the recognition of pre-tax compensation cost of approximately $20 million which is reported as loss from discontinued operations during the nine months ended September 30, 2006. Substantially all vested options held by A.T. Kearney employees were exercised or forfeited within ninety days of the divestiture.

	Three Months Ended March 31,
	2008				2007
	Revenues		Operating Income (Loss)		Revenues		Operating Income (Loss)
Americas	$	2,455	$	267	$	2,688	$	404
EMEA	1,729		182		1,631		196
Asia Pacific	522		53		478		47
U.S. Government	654		101		623		126
Other	-		(238)		2		(265)
Total Outsourcing	5,360		365		5,422		508
All other	5		(268)		(198)		(243)
Total	$	5,365	$	97	$	5,224	$	265

8 Segment information for non-U.S. operations is measured using fixed currency exchange rates in all periods presented. The Company adjusts its fixed currency exchange rates if and when the statutory rate differs significantly from the fixed rate to better align the two rates. Prior period segment information has been restated to reflect a change in the fixed exchange rates of certain non-U.S. currencies and other segment attribute changes in 2008. The "other" outsourcing category includes general and administrative support costs that are not allocated to the Company's operating segments for management reporting purposes. The "all other" category is primarily comprised of corporate expenses, including stock-based compensation, and also includes differences between fixed and actual exchange rates. Revenues for the Asia Pacific segment include MphasiS intersegment revenues of $59 million and $43 million, respectively, for the three months ended March 31, 2007 and 2006.

NOTE 810: ~~SEGMENT~~RETIREMENT ~~INFORMATION~~PLANS

~~The Company uses operating income (loss) to measure segment~~ ~~profit or loss. Segment information for non-U.S. operations~~ Following is ~~measured~~a ~~using fixed~~summary ~~currency~~of ~~exchange rates in all periods presented. The Company adjusts its fixed currency exchange rates if and when~~ the ~~statutory~~components ~~rate~~of ~~differs significantly~~net ~~from~~periodic ~~the~~benefit ~~fixed~~cost ~~rate~~recognized ~~to better align the two rates. Prior period~~in ~~segment~~earnings ~~information~~for ~~presented below has been restated to reflect a change in~~ the ~~fixed~~three ~~exchange~~months ~~rates~~ended ofMarch 31, ~~certain~~2008 ~~non-U.S. currencies~~ and ~~other~~2007 ~~segment attribute changes~~ (in ~~2007. The "all other" category is primarily comprised of corporate~~millions): ~~expenses, including stock-based compensation, and also includes differences~~ ~~between fixed and actual exchange rates. Operating segments that have similar economic and other characteristics have been aggregated to form the Company's reportable segments.~~

Following is a summary of certain financial information by reportable segment as of and for the three and nine months ended September 30, 2007 and 2006 (in millions):

	2008		2007
Service cost	$	89	$	94
Interest cost	152		130
Expected return on plan assets	(200)		(168)
Amortization of transition obligation	1		1
Amortization of prior-service cost	(9)		(9)
Amortization of net actuarial loss	1		8
Net periodic benefit cost	$	34	$	56

	Three Months Ended September 30,
	2007				2006
	Revenues		Operating Income (Loss)		Revenues		Operating Income (Loss)
Americas	$	2,634	$	425	$	2,585	$	393
EMEA	1,589		226		1,546		222
Asia Pacific	465		49		393		51
U.S. Government	710		179		685		157
Other	-		(247)		-		(260)
Total Outsourcing	5,398		632		5,209		563
All other	231		(270)		83		(348)
Total	$	5,629	$	362	$	5,292	$	215
	Nine Months Ended September 30,
	2007				2006
	Revenues		Operating Income (Loss)		Revenues		Operating Income (Loss)
Americas	$	7,816	$	1,192	$	7,757	$	1,128
EMEA	4,665		651		4,751		624
Asia Pacific	1,322		117		1,077		112
U.S. Government	1,952		436		1,894		270
Other	5		(761)		3		(784)
Total Outsourcing	15,760		1,635		15,482		1,350
All other	542		(774)		82		(902)
Total	$	16,302	$	861	$	15,564	$	448

The Company expects to contribute approximately $140 million to its pension plans worldwide during fiscal year 2008, including discretionary and statutory contributions, of which approximately $45 million was contributed during the three months ended March 31, 2008.

~~Revenues~~NOTE ~~for the Asia Pacific segment include MphasiS intersegment revenues of $51 million and $125 million, respectively, for the three and nine months ended September 30, 2007.~~ 11: TAXES

~~NOTE~~ The Company's ~~9: RETIREMENT~~effective ~~PLANS~~income tax rates on income from continuing operations were 39% and 36% for the three months ended March 31, 2008 and 2007, respectively. The effective tax rate in the first quarter of 2008 was impacted by the expiration of the U.S. research and development credit which had a negative impact on earnings of approximately $0.01 per share. The effective tax rate in the first quarter of 2007 was impacted by an additional valuation allowance against certain non-U.S. deferred tax assets, offset by favorable changes to the liability for non-U.S. tax contingencies.

~~The Company has several qualified and nonqualified pension~~ plans (the "Plans") covering substantially all its employees. The majority of the Plans are noncontributory. In general, employees become fully vested upon attaining two to five years of service, and benefits are based on years of service and earnings. The actuarial cost method currently used is the projected unit credit cost method. The Company's U.S. funding policy is to contribute amounts that fall within the range of deductible contributions for U.S. federal income tax purposes. The Company expects to contribute approximately $135 million to its pension plans worldwide during fiscal year 2007, including discretionary and statutory contributions, of which approximately $100 million has been contributed during the nine months ended September 30, 2007. 8

9NOTE 12: COMMITMENTS AND CONTINGENCIES

~~Following~~ In connection iswith certain service contracts, the Company may arrange a ~~summary~~client supported offinancing transaction ("CSFT") with a client and an independent third-party financial institution or its designee, or a securitization transaction where the ~~components~~Company sells certain financial assets resulting from the related service contract. Under CSFT arrangements, the financial institution finances the purchase of ~~net~~certain ~~periodic~~IT-related assets and simultaneously leases ~~pension~~those ~~cost~~assets ~~recognized~~for use in ~~earnings~~connection ~~for~~with the ~~three~~service contract. Under securitization transactions, the Company purchases capital assets and ~~nine~~sells ~~months~~certain ~~ended~~financial assets ~~September~~resulting from the related service contract to a trust. As of March 31, 302008, ~~2007~~an aggregate of $57 million outstanding under CSFTs and ~~2006~~$150 million of securitized financial assets were yet to be paid by the Company's clients (insee Note ~~millions~~6):. The Company believes it is in compliance with performance obligations under all service contracts for which there is a related CSFT or securitization and the ultimate liability, if any, incurred in connection with such financings will not have a material adverse affect on its consolidated results of operations or financial position.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Service cost	$	95	$	86	$	283	$	254
Interest cost	131		119		392		352
Expected return on plan assets	(172)		(140)		(512)		(415)
Amortization of transition obligation	1		-		2		1
Amortization of prior-service cost	(9)		(9)		(28)		(27)
Amortization of net actuarial loss	7		21		21		62
Net periodic benefit cost	$	53	$	77	$	158	$	227

In the normal course of business, the Company may provide certain clients, principally governmental entities, with financial performance guarantees, which are generally backed by standby letters of credit or surety bonds. In general, the Company would only be liable for the amounts of these guarantees in the event that nonperformance by the Company permits termination of the related contract by the Company's client, which the Company believes is remote. At March 31, 2008, the Company had $604 million of outstanding standby letters of credit and surety bonds relating to these performance guarantees. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse affect on its consolidated results of operations or financial position. In addition, the Company had $5 million of other financial guarantees outstanding at March 31, 2008 relating to indebtedness of others.

~~NOTE~~ Pending Litigation ~~10: TAXES~~and Proceedings

~~The~~ On December 19, 2003, Sky Subscribers Services Limited ("SSSL") and British Sky Broadcasting Limited ("BSkyB"), a former client of the Company, served a draft pleading seeking redress for the Company's ~~effective~~alleged ~~income~~failure ~~tax~~to perform ~~rates~~pursuant onto ~~income~~a ~~from continuing~~contract ~~operations~~between ~~were~~the 37parties.2% ~~and~~Under ~~39.8%~~applicable ~~for~~legal procedures, the ~~three~~Company ~~months~~responded ~~ended~~to ~~September~~the allegations. Despite the response, on 30August 17, ~~2007~~2004, SSSL and ~~2006,~~BSkyB ~~respectively.~~issued ~~The~~and served upon the Company's ~~effective~~a ~~income~~pleading alleging ~~tax~~the ~~rates~~following ondamages, each presented as an alternative cause of ~~income~~action: (1) pre-contract deceit in 2000 in the amount of £320 million (approximately $635 million); (2) pre-contract negligent misrepresentation in 2000 in the amount of £127 million (approximately $250 million); (3) deceit inducing the Letter of Agreement in July 2001 in the amount of £261 million (approximately $520 million); (4) negligent misrepresentation inducing the Letter of Agreement in July 2001 in the amount of £116 million (approximately $230 million); and (5) breach of contract from ~~continuing~~2000 ~~operations~~through ~~were~~2002 34in the amount of £101 million (approximately $200 million).7% On November 12, 2004, the Company filed its defense and ~~32.2%~~counterclaim ~~for~~denying the ~~nine~~claims ~~months~~and seeking damages in the ~~ended~~amount ~~September~~of 30£4.7 million (approximately $9.3 million). On December 21, ~~2007~~2005, SSSL and ~~2006~~BSkyB filed a Re-Amended Particulars of Claim alleging the following damages, ~~respectively~~still as alternative causes of action: (1) pre-contract deceit in the amount of £480 million (approximately $950 million); (2) pre-contract negligent misrepresentation and negligent misstatement in the amount of £480 million (approximately $950 million); (3) deceit inducing the Letter of Agreement and negligent misrepresentation inducing the Letter of Agreement of £415 million (approximately $825 million); and (4) breach of contract in the amount of £179 million (approximately $355 million). The ~~effective~~principal ~~tax~~stated ~~rate~~reason for the increases in amount of damages was that the ~~third~~claimants had taken the opportunity ~~quarter~~to re-assess their alleged lost profits and increased costs to deliver the project in light of ~~2007~~the extended timetable they then required to complete delivery of the project that was ~~impacted~~the bysubject of the ~~recently~~contract. ~~enacted~~Claimants ~~change~~said then that they would further re-assess these alleged losses prior to trial. In April 2007, the claimants served on EDS in draft further amendments to the Particulars ~~German~~of ~~tax~~Claim, and the Court conditionally granted claimants request to ~~rate~~amend. ~~which~~The ~~resulted~~claimants have increased the damages claim still further, as follows: (1) pre-contract deceit, negligent misrepresentation and negligent misstatement in athe ~~$30~~sum of £711.4 million ~~reduction~~(approximately in$1.4 ~~deferred~~billion); ~~tax~~(2) ~~assets~~deceit, negligent ~~partially~~misrepresentation ~~offset~~and bynegligent ~~favorable~~misstatement ~~changes~~inducing tothe Letter of Agreement in the ~~liabilities~~sum of £582.9 million (approximately $191.2 billion); and (3) breach of contract in the amount of £160.3 million ~~for~~(approximately ~~tax~~$315 million). These ~~contingencies~~heads ~~and~~of ~~other~~claim ~~audit~~are ~~related~~still ~~settlements~~pleaded in the alternative. The ~~tax~~principal ~~rates~~stated reason for the increases in ~~2006~~the ~~were~~amount of damages is that the claimants say they have ~~impacted~~re-assessed bytheir alleged losses in the ~~expiration~~light of expert witness evidence. Weeks later, and immediately prior to a hearing on May 25, 2007, the Uclaimants made further revisions to the quantum of their damages claims, as follows: (1) pre-contract deceit, negligent misrepresentation and negligent misstatement in the sum of £709.S3 million (approximately $1.4 ~~research~~billion); (2) deceit, negligent misrepresentation and ~~development~~negligent ~~credit,~~misstatement inducing the Letter of Agreement in ~~extension~~the sum of ~~which~~£523 ~~was~~million ~~not~~(approximately ~~enacted~~$1.0 ~~until~~billion); ~~fourth~~and ~~quarter~~(3) ~~2006~~breach of contract remained unchanged in the amount of £160.3 ~~The~~million ~~effective~~(approximately ~~tax~~$315 million). ~~rate~~These heads of claim are still pleaded in the alternative. The stated reason for the revisions of the ~~nine~~damages ~~months~~claims ~~ended~~in ~~September 30,~~(1) ~~2006~~and (2) above is that the claimants made arithmetical errors in the preceding amendments a few weeks earlier. A hearing was ~~also~~held ~~impacted~~on byMay 25, 2007 at which the court granted claimants leave to ~~passage~~amend their pleaded case. BSkyB has since made further amendments to points of detail ain ~~new~~the ~~Texas~~particulars ~~tax~~of ~~system~~claim, ~~requiring~~however athe ~~write-off~~pleaded quantum of ~~net~~the ~~deferred~~claim remains ~~tax~~unchanged. The dispute surrounds a contract the Company entered into ~~assets~~with ~~and~~BSkyB ~~favorable~~in ~~changes~~November to2000, which was terminated by the ~~liabilities~~Company in January 2003 for ~~tax~~BSkyB's ~~contingencies~~failure to pay its invoices. The contract had an initial total contract value of approximately £48 million which rose to just over £60 million during the term of the contract. The Company intends to defend

~~The Company adopted Financial Accounting Standards Board~~ Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, effective January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. As a result of the implementation of FIN 48, the Company recognized an increase of $2 million in net unrecognized tax benefits, which was accounted for as a decrease of $17 million to the January 1, 2007 balance of retained earnings and a decrease of $15 million to the balance of goodwill. In addition, reclassifications in balance sheet accounts as required by FIN 48 resulted in a decrease in deferred tax assets of $57 million and a decrease in other long term liabilities of $57 million. As of the date of adoption, the Company's gross unrecognized tax benefits totaled $127 million. Of this amount, $82 million represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. In addition, $18 million is accrued for the payment of interest and penalties related to income tax liabilities. The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. 9

~~The~~ against ~~Company~~these ~~files~~allegations ~~numerous~~vigorously. ~~income~~The ~~tax~~trial ~~returns~~for inthis ~~various~~matter ~~jurisdictions~~commenced ~~including~~in ~~U.S.~~October ~~Federal,~~2007 ~~state~~ and ~~foreign~~is ~~jurisdictions.~~scheduled ~~The Company~~to iscontinue ~~subject~~until tothe Uend of July 2008.S. ~~Federal~~Although ~~income~~there ~~tax~~can ~~examinations~~be ~~for~~no ~~years~~assurance ~~after~~as ~~2002 and~~to isthe ~~subject~~outcome toof ~~income~~this ~~tax~~matter, ~~examinations~~the Company bydoes UKnot ~~tax~~believe ~~authorities~~it ~~for~~will ~~years~~have ~~after~~a material adverse impact on its ~~2005~~consolidated results or financial position.

~~Unrecognized~~ There are ~~tax~~other ~~benefits~~various claims and ~~related~~pending ~~interest~~actions inagainst ~~non-US jurisdictions~~the ~~decreased~~Company byarising ~~$15 million~~ in the ~~first quarter and an additional~~ $8ordinary ~~million~~course inof ~~the~~its ~~third~~business. ~~quarter~~Certain ~~due~~of tothese ~~statute~~actions ofseek ~~limitations~~damages ~~expirations~~in significant amounts. The ~~Company~~ ~~also~~amount ~~anticipates settling approximately $20 million~~ of ~~liabilities over~~ the ~~next~~Company's ~~twelve~~liability ~~months,~~for ~~primarily~~such ~~related~~claims toand pending ~~various~~actions ~~U.S.~~at ~~tax~~March ~~returns~~31, ~~at amounts~~2008 ~~that~~was ~~are~~ not ~~significantly~~determinable. ~~different~~However, ~~from~~in the ~~amounts currently~~opinion ~~accrued.~~of ~~In addition~~management, ~~due to~~ the ~~ongoing~~ultimate ~~nature~~liability, ofif ~~current~~any, ~~examinations~~resulting ~~in various~~from ~~jurisdictions,~~such ~~other~~claims ~~changes~~and pending ~~could~~actions ~~occur~~will innot ~~the~~have ~~amount~~a ofmaterial ~~gross unrecognized~~adverse ~~tax~~affect ~~benefits~~on ~~during~~ the ~~next~~Company's consolidated ~~twelve~~results ~~months~~of ~~which~~operations ~~cannot~~or ~~be estimated~~financial ~~at this time~~position.

~~The~~NOTE ~~Company~~13: DISCONTINUED ~~accounts for taxes directly imposed on revenue-producing transactions by governmental authorities on a net basis (excluded from revenues).~~ OPERATIONS

10 Following is a summary of loss from discontinued operations for the three months ended March 31, 2008 and 2007 (in millions):

NOTE 11: COMMITMENTS AND CONTINGENCIES

	2008		2007
Revenues	$	-	$	-
Costs and expenses	-		7
Operating loss	-		(7)
Gain (loss), net	(1)		5
Loss from discontinued operations before income taxes	(1)		(2)
Income tax benefit	-		1
Loss from discontinued operations, net of income taxes	$	(1)	$	(1)

~~In connection with certain service contracts, the Company may~~ arrange a client supported financing transaction ("CSFT") with a client and an independent third-party financial institution or its designee. Under CSFT arrangements, the financial institution finances the purchase of certain IT-related assets and simultaneously leases those assets for use in connection with the service contract. As of September 30, 2007, an aggregate of $103 million was outstanding under CSFTs yet to be paid by the Company's clients. The Company believes it is in compliance with performance obligations under all service contracts for which there is a related CSFT and the ultimate liability, if any, incurred in connection with such financings will not have a material adverse affect on its consolidated results of operations or financial position. 10

InITEM the normal course of business, the Company may provide certain clients, principally governmental entities, with financial performance guarantees, which are generally backed by standby letters of credit or surety bonds2. ~~In general, the Company would only be liable for the amounts of these guarantees in the event that nonperformance by the Company permits termination of the related contract by the Company~~MANAGEMENT'sS ~~client,~~DISCUSSION ~~which~~AND ~~the~~ANALYSIS ~~Company~~OF ~~believes~~FINANCIAL ~~is remote.~~CONDITION AtAND ~~September~~RESULTS ~~30,~~OF 2007, the Company had $596 million of outstanding standby letters of credit and surety bonds relating to these performance guarantees. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse affect on its consolidated results of operations or financial position. In addition, the Company had $11 million of other financial guarantees outstanding at September 30, 2007 relating to indebtedness of others. OPERATIONS

~~Pending~~The ~~Litigation~~following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and ~~Proceedings~~related notes that appear elsewhere in this document.

The Company and certain of its former officers are defendants in numerous shareholder class action suits filed from September through December 2002 in response to its September 18, 2002 earnings pre-announcement, publicity about certain equity hedging transactions that it had entered into, and the drop in the price of EDS common stock. The cases allege violations of various federal securities laws and common law fraud based upon purported misstatements or omissions of material facts regarding the Company's financial condition. In addition, five class action suits were filed on behalf of participants in the EDS 401(k) Plan against the Company, certain of its current and former officers and, in some cases, its directors, alleging the defendants breached their fiduciary duties under the Employee Retirement Income Security Act ("ERISA") and made misrepresentations to the class regarding the value of EDS shares. All of the foregoing cases have been centralized in the U.S. District Court for the Eastern District of Texas (the "District Court"). In addition, representatives of two committees responsible for administering the EDS 401(k) Plan notified the Company of their demand for payment of amounts they believe are owing to plan participants under Section 12(a)(1) of the Securities Act of 1933 (the "Securities Act") as a result of an alleged failure to register certain shares of EDS common stock sold pursuant to the plan during a period of approximately one year ending on November 18, 2002. Overview

On Results. ~~July~~ First 7,quarter ~~2003,~~2008 ~~the~~revenues ~~lead~~of ~~plaintiff~~$5.4 inbillion ~~the~~increased ~~consolidated securities~~3% ~~action~~from ~~and~~ the ~~lead plaintiffs in the consolidated ERISA action each~~prior ~~filed~~year afirst ~~consolidated~~quarter ~~class~~and ~~action~~decreased ~~complaint.~~2% ~~The~~on ~~amended~~an ~~consolidated~~organic ~~complaint in~~basis, ~~the~~which ~~securities~~excludes ~~action alleges violations of Section 10(b) of~~ the ~~Securities~~ ~~Exchange~~impact ~~Act~~ of ~~1934~~currency ~~(the "Exchange Act")~~fluctuations, ~~Rule~~acquisitions ~~10b‑5 thereunder~~ and ~~Section~~ ~~20(a) of the Exchange Act~~divestitures. ~~The~~Income ~~plaintiffs allege that the Company and~~from ~~certain~~continuing ofoperations ~~its~~was ~~former~~$63 ~~officers~~million, ~~made~~or ~~false~~$0.12 ~~and~~per ~~misleading~~share, ~~statements~~in ~~about~~ the ~~financial~~ ~~condition~~first quarter of ~~EDS,~~2008 ~~particularly~~compared ~~with respect~~ to ~~the~~$165 ~~NMCI~~million, ~~contract~~or ~~and the~~$0.32 ~~accounting~~per ~~for~~basic ~~that~~share ~~contract~~and $0.31 ~~The~~per diluted ~~consolidated~~share, ~~complaint~~ in the ~~ERISA action~~prior ~~alleges~~year ~~violation~~first ofquarter. ~~fiduciary~~Net ~~duties~~income ~~under~~was ~~ERISA~~$62 bymillion, ~~some~~ or ~~all of the~~ ~~defendants and violation of Section~~ $0.12~~(a)(1)~~ ofper ~~the~~share, ~~Securities Act by selling unregistered EDS shares to plan participants. The defendants~~ in the ~~ERISA claims~~first ~~are~~quarter ~~EDS,~~of ~~certain~~2008 ~~current~~compared ~~and~~to ~~former~~$164 ~~officers of EDS~~million, ~~members~~or ~~of the~~$0.32 ~~Compensation~~per basic and ~~Benefits~~$0.31 ~~Committee~~per ofdiluted ~~its Board of Directors~~share, ~~and~~in ~~certain current and former members of~~ the ~~two~~prior ~~committees~~year ~~responsible~~first ~~for administering~~quarter. ~~the~~ ~~plan.~~

On Total Contract ~~November~~Value ~~1, 2005, the Company entered into a memorandum~~ of ~~understanding~~ ~~with~~New ~~the~~Contract ~~lead plaintiff and class representative to settle the consolidated securities action~~Signings. The ~~District~~total ~~Court~~contract ~~approved~~value, ~~that~~or ~~settlement on~~TCV, ~~March~~of 7,our ~~2006.~~new ~~The~~contract ~~terms~~signings ofin the ~~settlement~~first ~~provide~~quarter ~~for~~of a2008 ~~cash~~was ~~payment~~approximately of $~~137.~~5.6 ~~million~~billion, ~~substantially~~compared ~~all~~to ofapproximately ~~which~~$3.4 ~~was~~billion ~~paid~~in ~~during~~ the first quarter of ~~2006~~2007. ~~The~~ ~~amount paid by the Company aggregated $77.5 million, with the remainder~~We ~~paid~~refer byyou ~~its insurers (in addition~~ to ~~amounts~~the ~~paid~~discussion byof ~~such~~our ~~insurers~~calculation ~~in respect~~ of ~~legal~~TCV ~~fees~~under ~~related to this action). The Company recorded incremental~~"Management's ~~reserves~~Discussion ofand ~~$24~~Analysis ~~million in 2005 in connection with this settlement. The remaining cost~~ of ~~the~~Financial ~~settlement~~Condition ~~was~~and ~~recognized~~Results ~~prior to 2004. Two appeals were filed with respect to the District Court's approval~~ of ~~this~~Operations ~~settlement.~~- ~~One appeal,~~Non-GAAP ~~which~~Financial ~~was~~Measures" ~~dismissed~~ in ~~June~~our ~~2007,~~Annual ~~challenged~~Report ~~the~~on ~~amount~~Form of10-K ~~attorneys fees awarded to the counsel~~ for ~~plaintiffs. The other appeal, which challenged~~ the ~~approval of~~year ~~the settlement on the grounds that there is a subclass who receives no~~ended ~~economic~~December ~~benefit~~31, ~~the~~2007 ~~release~~("2007 isForm ~~overbroad, and the claims form was overly burdensome, was dismissed by the Fifth Circuit Court of Appeals in September 2007~~10-K").

On ~~November~~NMCI Contract. 8,We ~~2004,~~provide ~~the~~end-to-end ~~District~~IT ~~Court~~infrastructure ~~certified~~on a ~~class~~seat inmanagement basis to the ~~ERISA~~Department ~~action~~of Navy (the "DoN"), which includes the U.S. Navy and Marine Corps. Seats are ordered on a governmental fiscal year basis, which runs ~~certain~~from ofOctober 1 through September 30. Under the ~~allegations~~terms of ~~breach~~our ofcontract ~~fiduciary~~with the ~~duty~~DoN, seat prices were reduced commencing with the three months ended December 31, 2007, which will impact year-over-year comparisons of ~~all~~the performance ~~participants~~of inthis contract through the third quarter of 2008. Long-lived assets and lease receivables associated with the ~~EDS~~contract ~~401(k)~~totaled ~~Plan~~approximately $412 million and ~~their~~$134 ~~beneficiaries~~million, ~~excluding~~respectively, ~~the~~at ~~defendants~~March 31, ~~for~~2008. ~~whose accounts~~We ~~the~~expect ~~plan~~to ~~made~~recover a orsignificant ~~maintained~~portion ~~investments~~of our investment in ~~EDS~~this ~~stock~~contract through the ~~EDS~~sale of ~~Stock~~NMCI ~~Fund~~infrastructure ~~between~~and ~~September~~desktop 7,assets ~~1999~~to ~~and~~the ~~October~~client 9,at ~~2002.~~the ~~The~~end ~~court~~of ~~also~~the contract ~~certified~~term, aincluding ~~class~~amounts in excess of the expected carrying amounts of contract assets.

11 Share Count. The weighted-average number of shares used to compute basic and diluted earnings per share were 506 million and 513 million, respectively, for the three months ended March 31, 2008. Our share count reflects share repurchases as well as shares issued under our employee stock-based compensation programs. Factors that could affect basic and dilutive share counts in the future include the share price and additional repurchases of shares, offset by the dilutive effects of all our employee stock-based compensation plans and our contingently convertible senior notes. On a full-year 2008 weighted-average basis, we expect the number of shares used to compute diluted earnings per share to be approximately 530 million shares, which includes the full effect of our contingently convertible debt.

~~ERISA action on the~~ ~~allegations of violation of Section 12(a)(1) of the Securities Act of all~~On ~~participants~~December ~~in the Plan and their beneficiaries~~4, ~~excluding the defendants~~2007, ~~for whose~~our ~~accounts~~Board ~~the~~of ~~Plan~~Directors ~~purchased~~authorized ~~EDS~~a ~~stock~~$1 ~~through~~billion ~~the EDS Stock Fund between~~share ~~October~~repurchase ~~20,~~program ~~2001~~over ~~and November~~ 18, ~~2002~~months. OnThrough ~~January 18~~March 31, ~~2007~~2008, ~~the~~we ~~Fifth Circuit~~had ~~Court~~purchased of14.2 ~~Appeal~~million ~~issued~~shares ~~its~~at ~~decision~~a ~~vacating~~cost ~~the~~of ~~district~~$270 ~~court's~~million ~~class certification~~under ~~decision~~this ~~and remanding the matter to the district court to~~repurchase ~~re-evaluate~~program, ~~whether~~including ~~the~~11.5 ~~action~~million ~~may~~shares beat ~~maintained as~~ a ~~class~~cost ~~certification in light~~ of ~~the~~$213 ~~Fifth~~million ~~Circuit's~~in ~~opinion and instructions. The district court is expected to hear~~ the ~~plaintiffs' motion to certify a class consistent with the~~first ~~Fifth~~quarter ~~Circuit's~~of ~~ruling in January~~ 2008. ~~The Company intends to defend this action vigorously.~~

~~In addition, three derivative complaints were filed by~~ ~~shareholders in the District Court of Collin County, Texas against certain~~Update ~~current~~to ~~and~~2008 ~~former~~Financial ~~Company directors and officers and naming EDS as a nominal defendant~~Guidance. We ~~The~~currently ~~actions~~expect ~~allege~~revenues ~~breach~~ of ~~fiduciary~~$22.5 ~~duties,~~billion ~~abuse of control and gross mismanagement based upon purported misstatements or omissions of material facts regarding the Company's financial condition similar~~ to ~~those raised in~~ ~~the class actions described above~~$23.0 ~~These~~billion ~~cases~~in ~~have been consolidated into a single action. On February 25~~2008, ~~2004,~~reflecting aorganic ~~derivative~~revenue ~~complaint~~growth ~~was filed by a shareholder against certain current and former directors and officers~~ of ~~the Company~~approximately in1% ~~the District Court. The plaintiff relies upon substantially the same~~as ~~factual~~well ~~allegations~~ as the ~~consolidated~~impact ~~securities action discussed above. However, the plaintiff brings the suit on behalf~~ of ~~the~~currency ~~Company~~exchange ~~against~~rates ~~the named defendants claiming they breached their fiduciary duties by failing in their oversight responsibilities~~ and byrevenue ~~making~~attributable ~~and/or~~to ~~permitting~~our ~~material,~~November ~~false~~2007 ~~and~~acquisition ~~misleading~~of ~~statements~~Saber toGovernment beSolutions ~~made concerning the Company's business prospects, financial condition~~ and ~~expected~~our ~~financial~~April ~~results~~2008 ~~which~~acquisition ~~artificially~~of ~~inflated~~Vistorm ~~its~~Holdings ~~stock~~Limited. ~~and~~We ~~resulted~~currently inexpect ~~numerous~~2008 ~~class~~adjusted ~~action~~earnings ~~suits~~of $1.35 ~~Plaintiff~~to ~~seeks~~$1.39 ~~contribution~~per ~~and~~diluted ~~indemnification~~share. ~~for~~We ~~the~~refer ~~claims~~you ~~and~~to ~~litigation resulting from~~ the ~~defendants'~~discussion ~~alleged breach~~ of ~~fiduciary~~adjusted ~~duties. In October~~net ~~2004,~~income ~~two~~and ~~derivative~~adjusted ~~complaints~~earnings ~~were~~per ~~filed~~share inunder ~~the~~"Management's ~~District~~Discussion ~~Court by shareholders against certain current~~ and ~~former directors and officers of the~~ ~~Company.~~Analysis ~~The allegations include breach~~ of ~~fiduciary~~Financial ~~duties,~~Condition ~~abuse of control, gross mismanagement, constructive fraud, waste~~ and ~~unjust~~Results ~~enrichment based upon purported misstatements or omissions~~ of ~~material~~Operations ~~facts~~- ~~regarding~~Non-GAAP ~~the Company's~~Financial ~~financial~~Measures" ~~condition similar to those raised~~ in ~~the~~our ~~class~~2007 ~~actions~~Form ~~described above~~10-K. ~~Plaintiffs seek damages, disgorgement by individual defendants, governance reforms, and punitive damages.~~

~~In October 2007, the Company entered into a settlement~~ agreement with the lead plaintiffs for each of the foregoing derivative complaints. The terms of the settlement provide for a cash payment of $6 million, all of which will be paid by the Company's insurers. In addition, the Company has agreed to certain enhancements of its governance policies and formalization of certain existing governance practices. The settlement is subject to approval of the District Court. 11

~~On September 25, 2007, the Securities and Exchange Commission~~ ~~("SEC") entered an administrative order reflecting the settlement of all~~ ~~matters related to the SEC's formal investigation of the Company that had been~~ ~~commenced in 2002. In connection with the settlement, the Company consented to~~ ~~the entry of a cease and desist order that found the Company (i) did not~~ ~~adequately~~Results ~~disclose the cost~~ of certain derivatives contracts in connection with its program to manage the future stock issuance requirements of its employee stock incentive plans for the first and second quarters of 2002 and selectively disclosed the cost and early settlement of such contracts in the third quarter of 2002, (ii) did not adequately disclose in its Form 10-Q for the second quarter of 2002 a client prepayment, (iii) employed certain insufficiently supported assumptions in accounting models to estimate revenues and expenses for the NMCI Contract and (iv) maintained inaccurate books and records as a result of an alleged bribery scheme by an employee of a former subsidiary in India. The Company paid to the U.S. Treasury $490,902 related to the finding regarding the Company's former subsidiary in India, which matter had been self-reported by the Company to the SEC. Pursuant to the terms of the settlement, the Company did not admit or deny any of the allegations in the administrative order. Operations

On ~~December 19, 2003, Sky Subscribers Services Limited ("SSSL") and British Sky~~Revenues. ~~Broadcasting~~As-reported ~~Limited~~growth ~~("BSkyB"),~~percentages aare ~~former~~calculated ~~client~~using ofrevenues ~~the~~reported ~~Company,~~in ~~served a draft pleading seeking redress for~~ the ~~Company's alleged failure to perform pursuant~~ toconsolidated astatements ~~contract~~of ~~between the parties~~income. ~~Under~~Organic ~~applicable~~growth ~~legal~~percentages ~~procedures,~~are ~~the Company~~calculated ~~responded to the allegations. Despite the response, on August 17, 2004,~~by ~~SSSL~~removing ~~and~~from ~~BSkyB~~current ~~issued~~year ~~and served upon the Company a pleading alleging the following damages, each presented~~ as ~~an alternative cause of action: (1) pre~~-~~contract~~reported ~~deceit~~revenues ~~in 2000 in~~ the ~~amount~~impact of ~~£320 million (approximately $655 million); (2) pre-contract negligent misrepresentation in 2000 in~~ the ~~amount~~change ofin ~~£127~~exchange ~~million~~rates ~~(approximately~~between ~~$260 million); (3) deceit inducing~~ the ~~Letter~~local ~~of Agreement~~currency inand ~~July 2001 in~~ the ~~amount~~U.S. ofdollar ~~£261~~from ~~million (approximately $535 million); (4) negligent misrepresentation inducing~~ the ~~Letter of Agreement in~~current ~~July~~period ~~2001 in the amount of £116 million (approximately $235 million);~~ and ~~(5) breach of contract from 2000 through 2002 in~~ the ~~amount~~comparable ofprior ~~£101 million (approximately $205 million)~~period. OnIt ~~November~~further ~~12,~~excludes ~~2004,~~revenue ~~the~~growth ~~Company filed its~~due ~~defense~~to ~~and~~acquisitions ~~counterclaim~~in ~~denying~~ the ~~claims~~period ~~and~~presented ~~seeking~~if ~~damages in~~ the ~~amount~~comparable ~~of £4.7~~prior ~~million~~period ~~(approximately~~had ~~$9.6 million). On December 21, 2005, SSSL and BSkyB~~no ~~filed~~revenue afrom ~~Re-Amended Particulars of Claim alleging~~ the ~~following~~same ~~damages~~acquisition, ~~still~~and ~~as alternative~~revenue ~~causes~~decreases ofdue ~~action:~~to ~~(1) pre-contract deceit in the amount of £480~~businesses ~~million~~divested ~~(approximately $985 million); (2) pre-contract negligent misrepresentation and negligent misstatement~~ in the ~~amount~~period ofpresented ~~£480~~or ~~million (approximately $985 million); (3) deceit inducing~~ the ~~Letter~~comparable ofprior ~~Agreement~~period. ~~and~~Segment ~~negligent~~revenues ~~misrepresentation~~for ~~inducing~~non-U.S. ~~the~~operations ~~Letter~~are ofmeasured ~~Agreement~~using offixed ~~£415~~currency ~~million~~exchange ~~(approximately $850 million); and (4) breach of contract in the amount of £179 million (approximately $365 million)~~rates. ~~The~~Differences ~~principal~~between ~~stated reason for~~ the ~~increases~~ infixed ~~amount of damages was that the claimants had taken the opportunity to re-assess their alleged lost profits~~ and ~~increased~~actual ~~costs~~exchange torates ~~deliver~~are ~~the project~~included in ~~light of~~ the ~~extended~~"all ~~timetable~~other" ~~they then required to complete delivery of the~~ category.

12 Following is a summary of revenues for the three months ended March 31, 2008 and 2007 (in millions):

project that was the subject of the contract. Claimants said then that they would further re-assess these alleged losses prior to trial. In April 2007, the claimants served on EDS in draft further amendments to the Particulars of Claim, and the Court conditionally granted claimants request to amend. The claimants have increased the damages claim still further, as follows: (1) pre-contract deceit, negligent misrepresentation and negligent misstatement in the sum of £711.4 million (approximately $1.5 billion); (2) deceit, negligent misrepresentation and negligent misstatement inducing the Letter of Agreement in the sum of £582.9 million (approximately $1.2 billion); and (3) breach of contract in the amount of £160.3 million (approximately $330 million). These heads of claim are still pleaded in the alternative. The principal stated reason for the increases in the amount of damages is that the claimants say they have re-assessed their alleged losses in the light of expert witness evidence. Weeks later, and immediately prior to a hearing on May 25, 2007, the claimants made further revisions to the quantum of their damages claims, as follows: (1) pre-contract deceit, negligent misrepresentation and negligent misstatement in the sum of £709.3 million (approximately $1.5 billion); (2) deceit, negligent misrepresentation and negligent misstatement inducing the Letter of Agreement in the sum of £523 million (approximately $1.1 billion); and (3) breach of contract remained unchanged in the amount of £160.3 million (approximately $330 million). These heads of claim are still pleaded in the alternative. The stated reason for the revisions of the damages claims in (1) and (2) above is that the claimants made arithmetical errors in the preceding amendments a few weeks earlier. A hearing was held on May 25, 2007 at which the court granted claimants leave to amend their pleaded case. The dispute surrounds a contract the Company entered into with BSkyB in November 2000, which was terminated by the Company in January 2003 for BSkyB's failure to pay its invoices. The contract had an initial total contract value of approximately £48 million which rose to just over £60 million during the term of the contract. The Company intends to defend against these allegations vigorously. The trial for this matter commenced in October 2007 and is scheduled to continue until May 2008. Although there can be no assurance as to the outcome of this matter, the Company does not believe it will have a material adverse impact on its consolidated results or financial position.

					As-Reported	Organic
Consolidated revenues:	2008		2007		Growth %	Growth %
Revenues	$	5,365	$	5,224	3%	(2)%


					% Increase
Segment revenues:	2008		2007		(Decrease)
Americas	$	2,455	$	2,688	(9)%
EMEA	1,729		1,631		6%
Asia Pacific	522		478		9%
U.S. Government	654		623		5%
Other	-		2		-
Total Outsourcing	5,360		5,422		(1)%
All other	5		(198)
Total	$	5,365	$	5,224	3%

~~There~~ The decrease ~~are~~in ~~other~~Americas ~~various~~revenues ~~claims~~in ~~and~~2008 ~~pending~~was ~~actions~~primarily ~~against~~ attributable to the ~~Company~~Verizon contract ~~arising~~termination. Revenues in the ~~ordinary~~first ~~course~~quarter of ~~its~~2007 ~~business.~~include ~~Certain~~$100 million of ~~these~~a $225 million payment from Verizon related to the termination of ~~actions~~services ~~seek~~we ~~damages~~had inbeen ~~significant~~providing ~~amounts~~to MCI. The ~~amount~~decrease ofin ~~the~~Americas ~~Company's liability~~revenues ~~for~~in ~~such~~2008 ~~claims~~was ~~and~~also ~~pending~~due ~~actions~~to atvarious ~~September~~contracts ~~30,~~in ~~2007~~our ~~was~~communications, ~~not~~financial ~~determinable. However~~services, manufacturing and transportation industry groups in the ~~opinion~~U.S., including the impact of ~~management,~~contract ~~the~~terminations ~~ultimate~~and ~~liability~~renegotiations, ~~if any,~~partially ~~resulting~~offset by additional revenues from ~~such~~contracts ~~claims~~in our U.S. consumer industries and ~~pending~~retail ~~actions~~industry group ~~will~~and ~~not~~in ~~have~~Latin America. The increase in EMEA revenues in 2008 was primarily attributable to new contracts in our Central and South EMEA regions, partially offset by a ~~material~~net decrease in revenues from certain U.K. contracts. The increase ~~adverse~~in ~~affect~~Asia onPacific ~~the~~revenues ~~Company's~~in ~~consolidated~~2008 ~~results~~was primarily attributable to our majority-owned MphasiS subsidiary. The increase in U.S. Government revenues was primarily attributable to our Saber Government Solutions business which we acquired in the fourth quarter of ~~operations~~2007. The orchange ~~financial~~in "all other" was primarily ~~position~~attributable to differences in foreign currency exchange rates in the first quarter of 2008 compared with the first quarter of 2007.

~~NOTE~~ Gross margin. ~~12: ACQUISITIONS~~Our gross margin percentages [(revenues less cost of revenues)/revenues] were 10.3% and 13.4% for the three months ended March 31, 2008 and 2007, respectively. The decrease in our gross margin percentage in 2008 was primarily attributable to the Verizon contract (175 basis points). Revenues and gross profit in the first quarter of 2007 include $100 million of a $225 million payment from Verizon related to the termination of service we had been providing to MCI. Our gross margin in 2008 was also negatively impacted by the NMCI contract (40 basis points) resulting from certain contractual price reductions commencing in the fourth quarter of 2007 partially offset by contract performance, and by an increase in costs associated with our workforce alignment and infrastructure investment initiatives (30 basis points). Our gross margin in 2008 was also negatively impacted by various contract price adjustments and runoff.

~~On June 26, 2007, the Company acquired RelQ Software Private~~ ~~Limited~~Selling, general aand ~~software testing company based in Bangalore, India~~administrative. ~~The~~SG&A ~~cash~~expenses ~~purchase~~as ~~price~~a ofpercentage ~~RelQ, net~~ of ~~cash~~revenues were ~~acquired, was approximately $37 million~~8.5% ~~The acquisition of RelQ enhances the Company's global applications testing, validation~~ and ~~verification, and quality assurance services~~8.3% ~~The~~for ~~unaudited condensed consolidated statements of operations include~~ the ~~results~~three ofmonths ~~the acquired~~ended ~~business~~March ~~since~~31, ~~the~~2008 ~~date~~and ~~of acquisition~~2007, respectively. The ~~preliminary~~increase ~~purchase~~in ~~price allocation~~our isSG&A aspercentage ~~follows:~~in ~~accounts~~2008 ~~receivable~~was ~~- $9 million; prepaids and other~~primarily ~~current~~attributable ~~assets~~to -an $1increase ~~million;~~in ~~property~~selling ~~and~~costs, ~~equipment~~including -commissions ~~$2 million; goodwill - $23~~associated ~~million;~~with ~~other~~new ~~intangibles - $9 million; and other liabilities - $7 million. The preliminary purchase price allocation may change upon completion of the valuations of acquired assets and assumed liabilities of the~~ business. ~~Had the Company completed the acquisition as of the earliest date presented, results of operations on a pro forma basis would not have been materially different from actual results~~signings.

~~On June 20, 2006, the Company acquired a controlling interest~~ in MphasiS Limited, an applications and business process outsourcing services company based in Bangalore, India. The cash purchase price of the controlling interest, net of cash acquired, was $352 million. The acquisition of MphasiS enhances the Company's capabilities in priority growth areas of applications development and business process outsourcing services. The unaudited condensed consolidated statements of operations include the results of the acquired business since the date of acquisition. 12

13 Other income (expense). Other income (expense) includes interest expense, interest and dividend income, investment gains and losses, minority interest expense, and foreign currency transaction gains and losses. Following is a summary of other income (expense) for the three months ended March 31, 2008 and 2007 (in millions):

NOTE 13: DISCONTINUED OPERATIONS

	2008		2007
Interest expense	$	(41)	$	(57)
Interest income and other, net	47		50
Total	$	6	$	(7)

~~Loss~~ Other income ~~from~~(expense) ~~discontinued~~is ~~operations~~impacted ~~includes~~principally ~~the~~by ~~results of~~ the ~~Company's~~ ~~A.T.~~following: ~~Kearney~~changes ~~subsidiary which was sold~~ in ~~January~~cash ~~2006~~ and ~~the~~ ~~maintenance,~~debt ~~repair~~balances ~~and~~that ~~operations~~impact ~~(MRO)~~interest ~~management~~income ~~services~~and ~~business~~expense; ~~which~~changes ~~was sold~~ in ~~March~~interest rates; ~~2007.~~interest ~~Loss~~rate ~~from~~swap ~~discontinued~~revaluations; ~~operations~~investment ~~also includes various adjustments to~~ gains and losses; ~~associated with sales of certain businesses~~foreign ~~classified~~exchange astransaction ~~discontinued~~exposure; ~~operations~~and inminority ~~prior~~interest ~~years.~~expense ~~Proceeds~~for ~~from the sale of~~subsidiaries ~~A.T.~~with ~~Kearney included a 10~~third-~~year~~party ~~promissory note from the buyer valued at $52 million~~shareholders. The ~~Company~~interest ~~received~~expense aimprovement of $5216 million ~~payment from the buyer~~ in ~~the~~2008 ~~first quarter~~was ofprimarily ~~2007~~due to ~~satisfy this note. Under~~ the ~~terms~~decrease ofin ~~the~~interest ~~MRO~~rates ~~sale~~on ~~agreement and~~our ~~related customer contract amendments, the Company retained accounts~~variable ~~receivable~~rate ~~and~~debt. ~~certain~~Interest ~~other~~income ~~assets~~decreased of$10 ~~the~~million ~~business~~in ~~but~~2008, ~~transferred~~reflecting ~~the~~lower ~~tangible~~interest ~~assets~~rates ~~related~~while toaverage ~~the~~cash ~~MRO business to the buyer. The Company will continue to provide the buyer~~ and acash ~~major~~equivalent ~~customer~~balances ~~with~~remained ~~certain services during a transition period which may extend until the end of 2007~~steady. ~~Upon completion of~~ ~~this~~The ~~transition~~decrease ~~period,~~in ~~the~~interest ~~Company~~income ~~will~~was ~~have~~offset noby ~~continuing~~net ~~involvement~~gains in ~~operations~~ ofinterest ~~the~~rate ~~MRO management services business. The MRO business was~~swap ~~previously~~revaluations ~~included~~ in ~~the~~2008 ~~Company's~~also ~~A.T.~~caused ~~Kearney~~by ~~segment.~~lower No interest ~~expense has been allocated to discontinued operations for any of the periods presented~~rates.

~~Following~~ Income taxes. isOur aeffective ~~summary~~income oftax ~~loss~~rates on income from ~~discontinued~~continuing operations were 39% and 36% for the three ~~and nine~~ months ended ~~September~~March 3031, 2008 and 2007, respectively. The effective tax rate in the first quarter of 2008 was impacted by the expiration of the U.S. research and ~~2006~~development (credit which had a negative impact on earnings of approximately $0.01 per share. The effective tax rate in ~~millions):~~the first quarter of 2007 was impacted by an additional valuation allowance against certain non-U.S. deferred tax assets, offset by favorable changes to the liability for non-U.S. tax contingencies.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Revenues	$	-	$	11	$	1	$	54
Costs and expenses	(1)		19		19		88
Operating income (loss)	1		(8)		(18)		(34)
Gain (loss), net	-		-		-		(4)
Income (loss) from discontinued operations before income taxes	1		(8)		(18)		(38)
Provision (benefit) for income taxes	(1)		3		11		19
Loss from discontinued operations, net of income taxes	$	-	$	(5)	$	(7)	$	(19)

The U.S. research and development tax credit expired as of December 31, 2007. Our full-year 2008 earnings per share guidance assumes that the credit will be extended with retroactive effect to January 1, 2008. In the event that the legislation is not passed, full year guidance could be impacted, and quarterly results will continue to be adversely impacted until the extension of the credit is signed and can be reflected in the full year effective tax rate. We currently expect that these credits, if extended with retroactive effect to January 1, 2008, would have an impact of approximately $40 million on continuing operations for 2008.

14Segment information. Refer to Note 9 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements for a summary of certain financial information related to our reportable segments.

~~ITEM~~Seasonality. Our 2revenues, net income and operating cash flow vary over the calendar year, with the fourth quarter generally reflecting the highest revenues, net income and operating cash flow for the year due to certain services that are purchased more heavily in that quarter as well as the achievement of annual contractual delivery milestones for certain customer contracts in the fourth quarter. ~~MANAGEMENT'S~~ In ~~DISCUSSION~~addition, ~~AND~~annual ~~ANALYSIS~~contractual OFpricing ~~FINANCIAL~~reductions ~~CONDITION~~for ~~AND~~certain ~~RESULTS~~IT OFservices ~~OPERATIONS~~are generally weighted toward the beginning of the calendar year while productivity and cost improvements occur throughout the year, resulting in lower net income and operating cash flow earlier in the calendar year. Operating cash flow in the first quarter of each year is also reduced by annual incentive compensation payments accrued in the prior year and annual software and maintenance payments associated with the new fiscal year.

~~The~~Financial ~~following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear elsewhere in this document.~~Position

~~Overview~~ At March 31, 2008, we held cash and marketable securities of $2.8 billion, had working capital of $3.5 billion, and had a current ratio (current assets/current liabilities) of 1.73-to-1. This compares to cash and marketable securities of $3.2 billion, working capital of $3.5 billion, and a current ratio of 1.72-to-1 at December 31, 2007. Approximately 5% of our cash and cash equivalents and marketable securities at March 31, 2008 were not available for debt repayment due to various commercial and regulatory limitations on the use of these assets.

~~Results. Third quarter 2007 revenues of $5.6 billion~~ ~~increased~~Days sales 6%outstanding ~~from~~for ~~the~~trade ~~prior~~receivables ~~year~~were ~~third~~63 ~~quarter~~days ~~and~~at 4%March on31, an2008 ~~organic basis,~~compared ~~which~~to ~~excludes~~55 ~~the~~days ~~impact~~at ~~of currency fluctuations~~December 31, ~~acquisitions and divestitures~~2007. ~~Income~~We ~~from~~expect ~~continuing~~to ~~operations~~reduce ~~was~~DSO ~~$225~~throughout ~~million, or $0.44 per~~the ~~basic~~year ~~share~~to ~~and~~a ~~$0.42~~year-end ~~per~~level ~~diluted~~of ~~share,~~approximately in55 ~~the~~as ~~third~~achieved ~~quarter~~at ofDecember ~~2007~~31, ~~compared~~2007. toThe ~~$130~~reduction ~~million,~~of orDSO ~~$0.25~~to ~~per~~such ~~basic~~a ~~and~~level ~~diluted~~is ~~share,~~an inimportant ~~the~~element ~~prior~~of ~~year~~our ~~third~~ability to ~~quarter.~~achieve ~~Net~~our ~~income~~free ~~was~~cash ~~$225~~flow ~~million,~~guidance orfor $02008.44 ~~per~~Days ~~basic~~payable ~~and~~outstanding ~~$0.42~~were ~~per diluted~~23 ~~share,~~days inat ~~the~~March ~~third~~31, ~~quarter~~2008 ~~of 2007~~ compared to ~~$125~~21 ~~million,~~days orat ~~$0.24 per basic and diluted share~~December 31, ~~in the prior year third quarter~~2007.

Total ~~Contract Value of New Contract Signings. The~~ ~~total~~debt ~~contract value, or TCV, of our new contract signings in the third quarter of 2007~~ was ~~approximately~~ $53.73 billion, ~~compared~~at toMarch ~~approximately~~31, 2008 versus $3.54 billion in ~~the~~at ~~third~~December ~~quarter~~31, ~~of 2006~~2007. Total Wedebt ~~refer~~consists ~~you to the discussion~~ of ~~our~~notes ~~calculation of~~payable ~~TCV under "Management's Discussion~~ and ~~Analysis~~capital ofleases. ~~Financial~~The ~~Condition and~~total ~~Results of Operations~~ debt- ~~Non~~to-~~GAAP~~capital ~~Financial~~ratio ~~Measures"~~(which inincludes ~~our~~total ~~Annual~~debt ~~Report~~and onminority interests as ~~Form~~components ~~10-K~~of ~~for~~capital) ~~the~~was ~~year~~25% ~~ended~~at ~~December~~March 31, ~~2006~~2008 ~~("2006~~and ~~Form~~26% ~~10-K").~~at ~~The~~December ~~TCV of our new contract signings was approximately $13.4 billion for the nine months ended September 30~~31, 2007. ~~We expect the TCV of new contract signings in~~ ~~2007~~ ~~to be approximately $21 billion to $23 billion.~~

~~Early Retirement Offer. During the third quarter of 2007, we announced~~ an early retirement offer ("ERO") for approximately 12,000 U.S. employees. The deadline for accepting the ERO for the large majority of eligible employees was October 30, 2007. Employees accepting the offer will receive enhanced retirement benefits payable through normal payment options under the EDS Retirement Plan. In connection with the ERO, we expect to incur incremental expense of approximately $145 million in the fourth quarter of 2007, substantially all of which is attributable to the enhanced retirement benefits. Because substantially all of the ERO cash expenditures will be funded by the EDS Retirement Plan, EDS does not expect the ERO to result in any material cash expenditures in the future based on the current funded status of that plan. 13

~~NMCI Contract. We provide end~~Off-~~to-end~~Balance ITSheet ~~infrastructure on~~Arrangements ~~a seat management basis to the Department of Navy (the "DoN"), which includes the U.S. Navy~~ and ~~Marine Corps. On March 24, 2006, we entered into a~~Contractual contract modification with the DoN pursuant to which, among other amendments, the DoN exercised its option to extend this contract by three years through September 2010. As a result of the contract modification, in compliance with Emerging Issues Task Force 01-8, Determining Whether an Arrangement Contains a Lease, we recognized sales-type capital lease revenue of $116 million in the first quarter of 2006 associated with certain assets previously accounted for as operating leases, and certain assets previously accounted for as capital leases with an aggregate net investment balance of $113 million are now accounted for as operating leases based on revised estimates of economic lives as agreed in the contract modification (20 years). We expect to recover a significant portion of our investment in this contract through the sale of NMCI infrastructure and desktop assets to the client at the end of the contract term, including amounts in excess of the expected carrying amounts of contract assets. Long-lived assets and lease receivables associated with the contract totaled approximately $366 million and $306 million, respectively, at September 30, 2007. As a result of the activity on the contract during the first quarter of 2006, including the sales-type capital lease revenue resulting from the contract modification, we recognized net non-recurring income of $0.02 per share during that quarter. Obligations

~~U.K.~~ In connection ~~Ministry~~with ofcertain ~~Defence~~service ~~Contract. In March 2005~~contracts, ~~a consortium~~we ~~led~~may byarrange ~~EDS was awarded~~ a ~~10-year~~client ~~contract for the first increment of~~supported ~~the~~financing ~~U.K.~~transaction ~~Ministry of Defence~~ (~~MoD~~"CSFT") ~~project~~with toour ~~consolidate~~client ~~numerous~~and ~~existing information~~an ~~networks~~independent ~~into a single next~~third-~~generation infrastructure (the Defence~~party ~~Information~~financial ~~Infrastructure~~institution ~~Future~~or ~~project).~~its ~~The~~designee, ~~total~~or ~~contract~~a ~~value~~securitization oftransaction ~~the~~where we ~~initial~~sell ~~contract~~certain ~~was~~financial ~~approximately~~assets ~~$3.9~~resulting ~~billion~~from ~~over~~the 10related ~~years~~service contract. ~~Amendments to~~In ~~this~~CSFTs, ~~contract~~client inpayments ~~December~~are ~~2006~~made ~~and~~directly ~~September~~to ~~2007 increased~~ the ~~total~~financial ~~contract~~institution providing ~~value~~the ~~by approximately $1~~financing.7 ~~billion~~Under ~~over~~securitization ~~the~~transactions, ~~remaining~~we ~~years~~purchase ~~of the contract. Our upfront expenditure and~~ capital ~~investment requirements for this contract have~~assets ~~adversely impacted our free cash flow~~ and ~~earnings~~sell ~~during~~ certain ~~fiscal periods~~financial ~~since~~assets ~~inception~~resulting offrom the ~~contract~~related ~~and~~service ~~may continue~~ contract to doa sotrust. inIf the ~~future. There~~client ~~have~~does ~~occurred~~not ~~and~~make ~~may occur in~~ the ~~future~~required ~~program~~payments ~~changes~~under ~~and inabilities to achieve certain related dependencies that extend~~ the ~~initial development~~service ~~timeline. This~~ contract, ~~provides~~under ~~for~~no ~~adjustments~~circumstances todo bewe ~~made~~have toan ~~reflect~~ultimate ~~the financial~~obligation ~~impact~~ to ~~EDS~~acquire the ofunderlying ~~certain~~assets ~~program~~unless ~~changes~~our ~~and~~nonperformance ~~any~~under ~~inability~~the toservice ~~achieve~~contract ~~dependencies.~~would ~~During~~permit ~~the~~its ~~first~~termination, ~~second~~or ~~and third quarters of 2007,~~ we ~~reached~~fail ~~a mutually~~to ~~satisfactory~~comply ~~agreement~~ with ~~the~~certain ~~client~~customary ~~regarding some billing~~terms ~~adjustments~~ under the ~~contract~~financing toagreements, ~~reflect~~including, ~~part~~for ofexample, ~~the~~covenants ~~financial~~we ~~impact to us of~~have anundertaken ~~extended~~regarding ~~development timeline. We will continue in~~ the ~~ongoing~~use ~~course~~ of ~~this~~ ~~contract to work with~~ the ~~client~~assets tofor ~~agree~~their ~~upon~~intended ~~any~~purpose. ~~future appropriate~~We ~~adjustments~~consider ~~under~~ the ~~contract~~possibility ~~which~~of ~~may~~our befailure ~~necessary. If we are unable~~ to ~~reach~~ ~~agreement~~comply with ~~the~~any ~~client regarding such adjustments, our revenues, earnings and free cash flow for this contract, or the timing~~ of ~~the~~these ~~recognition thereof,~~terms ~~could~~to be ~~adversely impacted~~ remote.

15 As of March 31, 2008, an aggregate of $57 million outstanding under CSFTs and $150 million of securitized financial assets were yet to be paid by the Company's clients. In the event a client contract is terminated due to nonperformance, we would be required to acquire only those assets associated with the outstanding amounts for that contract. Net of repayments, the estimated future maximum amount outstanding under existing financing arrangements is not expected to exceed $250 million. We expect to continue to enter into CSFT and securitization financing arrangements with respect to significant new and certain existing client contracts in the ordinary course of business. We believe we have sufficient alternative sources of capital to directly finance the purchase of capital assets to be used for our current and future client contracts without the use of these arrangements.

~~Share Count. The weighted-average number of shares~~ ~~used to compute basic and diluted earnings per share were 511 million and 541~~Contractual ~~million, respectively, for the three months ended September 30, 2007, and 512 million and 543 million, respectively, for the nine months ended September 30, 2007~~obligations. ~~Our~~Following ~~share~~is count reflects share repurchases as well as shares issued under our employee stock-based compensation programs. Factors that could affect basic and dilutive share counts in the future include the share price and additional repurchases of shares, offset by the dilutive effects of all our employee stock-based compensation plans and our contingently convertible senior notes. We are evaluating a ~~longer-term~~summary ~~"share neutral" approach, the objective~~ of ~~which~~ ~~would~~payments bedue ~~to repurchase sufficient additional shares to approximately offset the dilutive effects of our employee stock-based compensation plans. Such approach would not require any additional share repurchases~~ in ~~2007.~~specified ~~We expect~~periods ~~the~~related ~~weighted-average number of shares used~~ to ~~compute diluted earnings per share to be approximately 545 million shares during 2007 (which includes the dilutive impact of~~ our ~~contingently~~contractual ~~convertible~~obligations ~~senior~~as ~~notes). In April 2007, we completed the $1 billion share repurchase program announced in February 2006. We purchased an aggregate~~ of ~~37.6~~March million shares of common stock at a cost of $1 billion (excluding transaction costs) under this program. The effect of our contingently convertible debt was dilutive for the three and nine months ended September 3031, ~~2007. Accordingly~~2008, ~~approximately~~including ~~$5 million of tax-effected interest was~~payments ~~added~~made toduring ~~income from continuing operations and net income and 20 million shares were added to weighted-average shares outstanding in~~ the ~~computation~~first ~~of diluted earnings per share for the~~ three months ~~ended September 30, 2007. Approximately $14 million~~ of ~~tax-effected~~2008 ~~interest was added to income from continuing operations~~ and ~~net~~payments ~~income~~due ~~and 20 million shares were added to weighted-average shares outstanding~~ in the ~~computation of diluted earnings per share for the~~remaining nine months ~~ended~~of ~~September~~2008 ~~30,~~(in ~~2007.~~millions):

MphasiS. In June 2006, we acquired a majority interest in MphasiS Limited, an applications and business process outsourcing services company based in Bangalore, India. In July 2007, we completed the merger of EDS Electronic Data Systems (India) Private Limited, our wholly-owned Indian subsidiary, into MphasiS. As of September 30, 2007, we own, through certain of our subsidiaries, approximately 61% of MphasiS.

			Payments Made / Due by Period
	Total		2008		2009-2010		2011-2012		After 2012
Long-term debt, including current portion and interest⁽¹⁾	$	4,489	$	370	$	1,902	$	271	$	1,946
Operating lease obligations	1,665		353		719		334		259
Purchase obligations⁽²⁾	1,790		1,139		596		54		1
Total⁽³⁾	$	7,944	$	1,862	$	3,217	$	659	$	2,206

~~Verizon.~~(1) Amounts Werepresent provided IT services to MCI, Inc. pursuant to an IT services agreement that included minimum annual purchase obligations through January 2008. MCI was acquired by Verizon Communications, Inc. in January 2006. In December 2006, Verizon in-sourced most of the ITexpected services we had been providing to MCI. During the first quarter of 2007, we received a payment of $225 million from Verizon related to the termination of these services we had been providing to MCI. Such payment was included in our free cash ~~flow for~~payments ~~the first quarter of 2007. We refer you to the discussion of free cash flow~~(principal ~~in "Liquidity~~ and ~~Capital~~interest) ~~Resources"~~of ~~below. Due to certain contingencies in~~ our ~~agreement~~ ~~with~~long-term ~~this~~debt ~~client, approximately $125 million of the $225 million payment was deferred~~ and ~~recognized in the third quarter of 2007. The remaining amount was recognized in the first quarter of 2007. We~~ do not ~~expect~~include ~~to recognize~~ any ~~significant~~fair ~~revenue~~value adjustments or ~~earnings~~bond premiums or ~~generate any significant cash flow from this client after the third quarter of 2007~~discounts. WeAmounts ~~refer~~also ~~you~~include tocapital ~~the~~lease ~~discussion~~payments of(principal ~~our relationships with Verizon in "Management's Discussion~~ and ~~Analysis~~ ~~of Financial Condition and Results of Operations - Overview - Verizon" in our 2006 Form 10-K~~interest).

~~2007~~(2) Purchase ~~Full~~obligations ~~Year~~include material ~~Financial~~agreements ~~Guidance. We~~to ~~currently expect~~purchase togoods ~~achieve~~or ~~the~~services, ~~low~~principally ~~end~~software ofand telecommunications ~~our~~services, ~~full~~that ~~year~~are ~~2007~~enforceable ~~financial~~and ~~guidance~~legally ~~of adjusted~~binding ~~earnings~~on ~~per~~EDS and ~~share~~that ofspecify ~~$1.55~~all tosignificant ~~$1.60~~terms, ~~revenue~~including: ~~of $22~~fixed ~~billion~~or tominimum ~~$22.5~~quantities ~~billion,~~to ~~and~~be ~~free~~purchased; ~~cash~~fixed, ~~flow~~minimum ofor ~~$900~~variable ~~million~~price toprovisions; $1and ~~billion. Our adjusted~~the ~~earnings~~approximate ~~per~~timing ~~share~~of ~~guidance excludes~~ the ~~impact~~transaction. Purchase ofobligations ~~the~~exclude ~~estimated incremental~~agreements ~~expense~~that ofare ~~approximately~~cancelable ~~$145~~without ~~million~~penalty. toPurchase beobligations ~~incurred~~also inexclude ~~the fourth quarter~~our ~~related~~obligation to ~~the~~repurchase ~~early~~minority ~~retirement~~interests ~~offer~~in ~~discussed~~joint ~~above. We~~ventures, ~~refer~~including ~~you~~our obligation to ~~the~~repurchase ~~definition and~~Towers ~~discussion~~Perrin's ofminority ~~adjusted~~interest ~~earnings~~in ~~per share~~ ExcellerateHRO, and ~~free~~to ~~cash~~repurchase ~~flow~~the ~~in "Management's~~approximately ~~Discussion~~7% ~~and~~interest ~~Analysis~~in ofour ~~Financial~~recently ~~Condition~~acquired ~~and Results~~Saber ofGovernment ~~Operations~~Solutions -subsidiary ~~Non-GAAP~~retained ~~Financial~~by ~~Measures"~~management inof ~~our~~that ~~2006 Form 10-K~~business.

~~Results~~(3) We contributed $45 million to our qualified and nonqualified pension plans in the first quarter of ~~Operations~~2008, and we expect to contribute approximately $140 million to these plans in 2008, including discretionary and statutory contributions. Our U.S. funding policy is to contribute amounts that fall within the range of deductible contributions for U.S. federal income tax purposes.

~~Revenues.~~Liquidity As-reported growth percentages are calculated using revenues reported in the consolidated statements of operations. Organic growth percentages are calculated by removing from current year as-reported revenues the impact of the change in exchange rates between the local currency and ~~the~~Capital U.S. dollar from the current period and the comparable prior period. It further excludes revenue growth due to acquisitions in the period presented if the comparable prior period had no revenue from the same acquisition, and revenue decreases due to businesses divested in the period presented or the comparable prior period. Segment revenues for non-U.S. operations are measured using fixed currency exchange rates. Differences between the fixed and actual exchange rates are included in the "all other" category. Resources

16 Following is a summary of our cash flows for the three months ended March 31, 2008 and 2007 (in millions):

Following is a summary of revenues for the three months ended September 30, 2007 and 2006 (in millions):

	2008		2007
Net cash provided by operating activities	$	251	$	242
Net cash used in investing activities	(282)		(167)
Net cash used in financing activities	(304)		(268)
Free cash flow	(126)		(8)

					As-Reported	Organic
Consolidated revenues:	2007		2006		Growth %	Growth %
Revenues	$	5,629	$	5,292	6%	4%
					% Increase
Segment revenues:	2007		2006		(Decrease)
Americas	$	2,634	$	2,585	2%
EMEA	1,589		1,546		3%
Asia Pacific	465		393		18%
U.S. Government	710		685		4%
Other	-		-
Total Outsourcing	5,398		5,209
All other	231		83
Total	$	5,629	$	5,292	6%

~~Revenue growth in the Americas was primarily due to increased~~ ~~revenues~~Operating activities. ~~from~~The aincrease ~~contract with a client~~ in ~~our~~cash ~~consumer~~provided ~~industries~~by ~~and~~operating ~~retail group~~activities ~~and a government client~~ in ~~Canada.~~2008 compared ~~Revenue~~to ~~growth~~2007 ~~in the Americas~~ was ~~also~~ due to ~~increased~~a ~~revenues~~$13 ~~from~~million ~~Verizon.~~decrease Asin ~~discussed~~cash ~~above,~~provided ~~revenues~~by earnings ~~related~~(i.e., tonet ~~Verizon~~income inless ~~the~~non-cash ~~third~~operating ~~quarter~~items) ofand ~~2007~~a ~~includes~~ $~~125~~22 million ofnet ~~a $225~~change ~~million payment received~~ in ~~the~~operating ~~first~~assets ~~quarter~~and asliabilities. ~~well~~The aschange ~~revenues~~in ~~from~~operating ~~certain~~assets and ~~services~~liabilities weresulted ~~will~~primarily ~~continue~~from toapproximately ~~provide~~$150 ~~Verizon~~million ~~through~~in proceeds from the ~~remainder~~sale of ~~this year.~~lease ~~Revenue~~receivables ~~growth~~ in ~~EMEA~~2008 ~~was~~and ~~primarily~~approximately ~~due~~$50 tomillion ~~increased~~in ~~revenues~~reduced payments ~~from~~related ~~a contract~~to ~~with~~our ~~the~~workforce Ualignment initiatives.K. ~~MoD~~These ~~and~~items ~~contracts~~were ~~with~~partially offset ~~other~~by ~~clients~~a in$178 ~~the~~million ~~U.K.~~decrease ~~and~~ in ~~Central~~amounts ~~and~~collected ~~South~~from ~~EMEA.~~customers ~~Revenue~~but ~~growth~~not yet inearned, ~~EMEA~~including ~~was~~$125 ~~partially~~million ~~offset~~of bythe ~~our~~$225 ~~fourth quarter~~million ~~2006~~payment ~~divestiture~~received ofin ~~Global~~the first ~~Field~~quarter ~~Services~~of ~~("GFS"),~~2007 ~~which~~associated ~~represented approximately~~with ~~$75~~the ~~million~~termination of ~~third~~the ~~quarter~~Verizon ~~2006 revenues~~contract, and a ~~decrease~~$63 ~~in revenues~~million ~~from~~increase ~~a U.K. government client. Revenue growth~~ in ~~Asia~~deferred ~~Pacific~~contract ~~was~~ costs, primarily ~~attributable~~related to transition ~~our~~and ~~MphasiS~~transformation ~~subsidiary.~~activities ~~Revenue~~associated ~~growth~~with ina ~~U.S. Government~~large ~~was~~contract ~~primarily attributable to~~ in the ~~NMCI contract~~U.K.

~~Following~~ Investing activities. isThe achange ~~summary~~in net cash used in investing activities in 2008 compared to 2007 was primarily due to an increase in purchases of ~~revenues~~property ~~for~~and equipment and software, including approximately $50 million associated with the purchase ~~nine~~of ~~months~~real ~~ended~~property and a building for a new data center and ~~September~~approximately ~~30,~~$40 ~~2007~~million associated with a software subscription arrangement, and a ~~2006~~decrease (in ~~millions):~~ proceeds from divested assets. Proceeds from divested assets in 2007 included the collection of a $52 million promissory note related to the sale of A.T. Kearney.

					As-Reported	Organic
Consolidated revenues:	2007		2006		Growth %	Growth %
Revenues	$	16,302	$	15,564	5%	2%
					% Increase
Segment revenues:	2007		2006		(Decrease)
Americas	$	7,816	$	7,757	1%
EMEA	4,665		4,751		(2)%
Asia Pacific	1,322		1,077		23%
U.S. Government	1,952		1,894		3%
Other	5		3
Total Outsourcing	15,760		15,482
All other	542		82
Total	$	16,302	$	15,564	5%

Financing activities. The increase in net cash used in financing activities in 2008 compared to 2007 was primarily due to employee stock transactions, partially offset by a decrease in purchases of treasury stock.

~~Revenue~~ Free cash ~~growth~~flow. inWe ~~the~~reported ~~Americas~~a ~~was~~free ~~primarily~~cash ~~attributable~~flow ~~to a~~usage ~~contract~~of ~~with~~$126 amillion ~~new~~for ~~client~~the inthree months ~~our~~ended ~~consumer~~March ~~industries~~31, ~~and~~2008 ~~retail~~compared ~~group~~to ~~and add-on~~a ~~business~~usage ~~with~~of an$8 ~~existing~~million ~~client~~for inthe ~~our~~three months ~~financial~~ended ~~services~~March ~~industry group~~31, ~~partially~~2007. ~~offset~~We bydefine afree ~~decrease~~cash inflow ~~revenues~~as ~~from~~net ~~Verizon.~~cash Asprovided ~~discussed~~by ~~above~~operating activities, ~~revenues~~less ~~related~~capital toexpenditures. ~~Verizon~~Capital ~~includes~~expenditures ais ~~$225~~the sum ~~million~~of ~~payment~~(i) ~~received~~net cash used in ~~the~~ ~~first~~investing ~~quarter~~activities, ofexcluding ~~which~~proceeds ~~approximately~~from ~~$100~~sales of ~~million~~marketable ~~was~~securities, ~~recognized~~proceeds inrelated ~~that quarter~~to ~~and~~divested ~~the~~assets ~~remainder deferred~~ and non-marketable ~~recognized~~equity ininvestments, ~~the~~payments ~~third~~for ~~quarter~~acquisitions, asnet ~~well~~of cash asacquired, ~~revenues~~and ~~from~~non-marketable ~~certain~~equity ~~services~~investments, weand ~~will~~payments ~~continue~~for topurchases ~~provide Verizon through~~of ~~the~~marketable ~~remainder~~securities, ofand ~~this~~(ii) ~~year.~~payments ~~The~~on ~~decrease~~capital inleases. ~~EMEA~~Free ~~revenues~~cash ~~was primarily~~flow ~~attributable~~excludes toitems ~~the~~that ~~divestiture~~are ofactual ~~GFS~~expenditures ~~and~~that ~~revenue~~impact ~~declines~~cash inavailable ~~certain~~to ~~U.K.~~us ~~contracts,~~for other ~~partially~~uses ~~offset~~and byshould ~~increased~~not ~~revenues~~be ~~from~~considered ~~various~~a ~~contracts~~measure ~~with~~of ~~the~~liquidity ~~U.K.~~or ~~MoD and~~an ~~contracts~~alternative ~~with~~to ~~other~~the ~~clients~~cash inflow ~~the~~measurements ~~U.K.~~required ~~and~~by inGAAP, ~~Central~~such ~~and~~as ~~South~~net ~~EMEA. Revenue~~cash ~~growth~~provided inby ~~Asia~~operating ~~Pacific~~activities ~~was~~or ~~primarily~~net ~~attributable~~increase/decrease toin ~~our~~cash ~~acquisition~~and ~~of MphasiS~~cash inequivalents. ~~the~~We ~~second~~may ~~quarter~~not ofdefine ~~2006,~~free ~~partially~~cash ~~offset~~flow byin athe ~~decline~~same inmanner ~~revenues~~as ~~from a~~other ~~client~~companies inand, accordingly, the ~~financial~~free ~~services~~cash ~~industry~~flow inwe ~~Australia.~~report ~~Revenue~~may ~~growth~~not inbe ~~U.S.~~comparable ~~Government~~to ~~was~~similarly ~~primarily~~titled ~~attributable~~measures toreported ~~the~~by ~~NMCI~~other ~~contract~~companies.

~~Gross~~ Following is ~~margin.~~a ~~Our gross~~reconciliation ~~margin~~of ~~percentages~~free ~~[(revenues~~cash ~~less~~flow ~~cost~~to ofthe ~~revenues)/revenues]~~net ~~were~~change ~~14.9%~~ in cash and ~~12.6%~~cash equivalents for the three months ended ~~September~~March 3031, ~~2007~~2008 and ~~2006,~~2007 ~~respectively. The increase~~ (in ~~our gross margin percentage in 2007 was primarily attributable to the Verizon~~ millions):

	2008		2007
Net cash provided by operating activities	$	251	$	242

Capital expenditures:
Proceeds from investments and other assets	30		43
Payments for purchases of property and equipment	(229)		(158)
Payments for purchases of software and other intangibles	(131)		(106)
Other investing activities	2		3
Capital lease payments	(49)		(32)
Total net capital expenditures	(377)		(250)
Free cash flow	(126)		(8)

Other investing and financing activities:
Proceeds from sales of marketable securities	43		-
Net proceeds from divested assets and non-marketable equity securities	9		53
Payments for acquisitions, net of cash acquired, and non-marketable equity securities	(6)		(1)
Payments for purchases of marketable securities	-		(1)
Proceeds from long-term debt	-		3
Payments on long-term debt	(1)		(10)
Purchase of treasury stock	(213)		(285)
Employee stock transactions	(18)		77
Dividends paid	(25)		(26)
Other financing activities	2		5
Effect of exchange rate changes on cash and cash equivalents	(4)		1
Net decrease in cash and cash equivalents	$	(339)	$	(192)

~~contract (135 basis points) and NMCI (60 basis points). The remaining change in our~~ ~~gross margin percentage in 2007 was primarily due to incremental costs in 2006 related to investments in our infrastructure, new service offerings and severance.~~ 15

~~Our~~ Covenants. On ~~gross~~June ~~margin~~30, ~~percentages~~2006, ~~were~~we ~~13.9%~~entered ~~and~~into ~~11.7%~~a ~~for~~$1 billion Five Year Credit Agreement (the ~~nine~~"Credit ~~months~~Agreement") ~~ended~~with ~~September~~a ~~30,~~bank ~~2007~~group ~~and~~including ~~2006~~Citibank, ~~respectively~~N.A., ~~The increase in~~as ~~our~~Administrative ~~gross~~Agent ~~margin~~for ~~percentage~~the inlenders, ~~2007~~and ~~was~~Bank ~~primarily~~of ~~attributable~~America, toN.A., ~~improved~~as Syndication ~~financial~~Agent. ~~performance~~The onCredit ~~certain~~Agreement ~~large~~may ~~contracts,~~be ~~including~~used ~~NMCI~~for ~~(110~~general ~~basis~~corporate borrowing ~~points).~~purposes ~~Our~~and ~~gross~~issuance ~~margin~~of ~~was~~letters ~~also~~of ~~favorably~~credit, ~~impacted~~with bya ~~the~~$500 ~~Verizon~~million ~~contract~~sub-limit for ~~(50~~letters ~~basis~~of ~~points)~~credit. The ~~remaining~~Credit ~~change~~Agreement incontains ~~our~~certain ~~gross~~financial ~~margin~~and inother restrictive ~~2007~~covenants ~~was~~which would allow any amounts outstanding thereunder to ~~primarily~~be ~~due~~accelerated, or restrict our ability to ~~efficiencies~~borrow thereunder, in the event of our Unoncompliance.S. ~~service~~Following ~~delivery~~is ~~organization.~~ a summary of such covenants and the calculated ratios at March 31, 2008:

Selling, general and administrative. SG&A expenses as a percentage of revenues were 8.5% and 8.6% for the three months ended September 30, 2007 and 2006, respectively. SG&A expenses as a percentage of revenues were 8.6% and 8.9% for the nine months ended September 30, 2007 and 2006, respectively. The decrease in our SG&A percentages was primarily attributable to an increase in revenues in 2007 while maintaining SG&A spend between periods.

	Covenant	Actual
Leverage ratio	≤ 3.00	1.17
Interest coverage ratio	≥ 3.00	13.31

~~Other income (expense)~~ Credit ratings. Following ~~Other~~is ~~income~~a ~~(expense) includes~~summary ~~interest~~of ~~expense,~~our ~~interest~~senior ~~and~~long-term ~~dividend~~debt ~~income,~~credit ~~investment gains and~~ratings ~~losses,~~by ~~minority~~Moody's ~~interest~~Investor ~~expense~~Services, ~~and~~Inc. ~~foreign~~("Moody's"), ~~currency~~Standard ~~transaction~~& ~~gains~~Poor's ~~and~~Rating ~~losses.~~Services ~~Following~~("S&P") isand aFitch ~~summary~~Ratings ~~of other income~~ (~~expense~~"Fitch") ~~for~~at ~~the~~March ~~three and nine months ended September 30~~31, ~~2007 and 2006 (in millions)~~2008:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Moody's	S&P	Fitch
	2007		2006		2007		2006
Senior long-term debt	Baa3	BBB-	BBB
Interest expense	$	(56)	$	(58)	$	(169)	$	(181)
Outlook	Stable	Stable	Stable
Interest income and other, net	52		59		126		134
Total	$	(4)	$	1	$	(43)	$	(47)

~~Income taxes. Our effective income tax rates on income~~ ~~from~~At ~~continuing operations were 37.2% and 39.8% for the three months ended~~March ~~September 30~~31, ~~2007 and 2006~~2008, ~~respectively.~~we ~~Our~~had ~~effective~~no ~~income~~recognized ~~tax~~or ~~rates~~contingent ~~on income~~material ~~from~~liabilities ~~continuing~~that ~~operations~~would ~~were~~be subject ~~34.7%~~to ~~and~~accelerated ~~32.2%~~payment ~~for~~due ~~the~~to ~~nine~~a ~~months ended~~ratings ~~September 30, 2007 and 2006, respectively~~downgrade. ~~The~~We ~~effective~~do ~~tax~~not ~~rate~~believe ~~in the third~~a ~~quarter~~negative ~~of 2007 was impacted by the recently enacted~~ change in ~~the~~our ~~German~~credit ~~tax rate~~rating ~~which~~would ~~resulted~~have in a ~~$30~~material ~~million~~adverse ~~reduction~~impact inon ~~deferred tax assets,~~us ~~partially~~under ~~offset by favorable changes to~~ the ~~liabilities~~terms ~~for tax contingencies and other audit related settlements. The tax rates in 2006 were impacted by the expiration~~ of ~~the~~our ~~U.S.~~existing ~~research~~client ~~and development credit, the extension of which was not enacted until fourth quarter 2006~~agreements. The effective tax rate for the nine months ended September 30, 2006 was also impacted by the passage of a new Texas tax system requiring a write-off of net deferred tax assets and favorable changes to the liabilities for tax contingencies.

~~We adopted Financial Accounting Standards Board~~ ~~Interpretation No~~Liquidity. At ~~("FIN")~~March 4831, ~~Accounting~~2008, ~~for~~we ~~Uncertainty~~had intotal ~~Income~~liquidity ~~Taxes - an interpretation~~ of ~~FASB Statement No~~$3.5 ~~109~~billion, ~~effective~~comprised ~~January 1, 2007. FIN~~of 48unrestricted ~~clarifies~~cash ~~the~~and ~~accounting~~marketable ~~for~~securities ~~uncertainty in income taxes recognized in an entity's financial statements in accordance with Statement~~ of ~~Financial Accounting Standards No~~$2. ~~109,~~7 ~~Accounting~~billion ~~for Income Taxes,~~ and ~~prescribes~~ ~~a recognition threshold and measurement attribute for financial~~availability ~~statement~~under ~~disclosure~~our ofunsecured ~~tax~~credit ~~positions~~facilities ~~taken or expected to be taken on a tax return. As a result~~ of ~~the implementation of FIN 48, we recognized an increase of~~ $2823 million. inManagement ~~net~~currently intends ~~unrecognized~~to ~~tax~~maintain ~~benefits.~~unrestricted ~~Refer~~cash toand ~~Note~~marketable 10securities in ~~the~~an amount ~~accompanying~~equal ~~Notes~~ to ~~Unaudited~~at ~~Condensed~~least ~~Consolidated~~$1 ~~Financial Statements for additional information~~billion.

~~Discontinued operations. Loss from discontinued~~ ~~operations includes the results of the Company's A.T. Kearney subsidiary which~~New ~~was~~Accounting sold in January 2006 and the maintenance, repair and operations (MRO) management services business which was sold in March 2007. Loss from discontinued operations also includes various adjustments to gains and losses associated with sales of certain businesses classified as discontinued operations in prior years. Refer to Note 13 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements for additional information related to discontinued operations. Pronouncements

~~Segment~~ In December ~~information.~~2007, the Financial Accounting Standards Board ("FASB") issued ~~Refer~~Statement toNo. ~~Note~~141R, 8Business inCombinations, ~~the~~and ~~accompanying~~Statement ~~Notes~~No. to160, ~~Unaudited~~Noncontrolling Interests ~~Condensed~~in Consolidated Financial Statements, an amendment of ARB No. 51. Statement No. 141R modifies the accounting and disclosure requirements for abusiness ~~summary~~combinations and broadens the scope of ~~certain~~the ~~financial~~previous standard ~~information~~to ~~related~~apply to all transactions in which one entity obtains control over ~~our~~another ~~reportable~~business. ~~segments~~Statement No. 160 establishes new accounting and reporting standards for noncontrolling interests in subsidiaries. We will be required to apply the provisions of the new standards in the first quarter of 2009.

18We adopted FASB Statement No. 157, Fair Value Measurements, for our financial assets and liabilities effective January 1, 2008. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. We elected to defer the provisions of Statement No. 157 for our nonfinancial assets and liabilities. Such assets and liabilities, which include our noncurrent assets, long-term debt, minority interest and other long-term liabilities, will be subject to the provisions of Statement No. 157 effective January 1, 2009. The full adoption of this standard is not expected to have a material impact on our results of operations, liquidity or capital resources. Refer to Note 2 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements for additional information related to our financial assets and liabilities measured at fair value.

~~Financial Position~~ 16

~~At September 30, 2007, we held cash and marketable securities~~ ~~of $3.1 billion, had working capital of $3.4 billion, and had a current ratio~~Cautionary ~~(current~~Statement ~~assets/current~~Regarding ~~liabilities) of 1.65~~Forward-~~to-1.~~Looking This compares to cash and marketable securities of $3.0 billion, working capital of $3.0 billion, and a current ratio of 1.58-to-1 at December 31, 2006. Approximately 5% of our cash and cash equivalents and marketable securities at September 30, 2007 were not available for debt repayment due to various commercial limitations on the use of these assets. Statements

~~Days~~ Except for ~~sales~~the ~~outstanding~~historical ~~for~~information ~~trade~~and ~~receivables~~discussions (contained herein, statements contained in this Form 10-Q may constitute "~~DSO~~forward looking statements") ~~were~~within the 62meaning of the Private Securities Litigation Reform Act of 1995. These ~~days~~forward-looking atstatements ~~September~~include 30statements regarding future financial performance, ~~2007~~TCV ~~compared~~of tonew 56contract ~~days~~signings atand ~~December 31,~~other ~~2006~~forward-looking financial information. ~~The~~Any forward-looking statement may rely on a number of assumptions concerning ~~increase~~future inevents ~~DSO~~and ~~was~~be ~~due~~subject to ~~weaker~~a ~~collections~~number of ~~accounts~~uncertainties ~~receivable~~and ~~across~~other ~~all~~factors, many of which are outside our ~~reportable~~control, ~~segments~~that could cause actual results to differ materially from such statements. These factors include, but are not limited to, the following: the performance of current and ~~changes~~future client contracts in ~~certain~~accordance ~~contract~~with ~~billing~~our ~~terms~~cost, ~~during~~revenue and cash flow estimates, ~~2007~~including our ability to achieve any operational efficiencies in our estimates; for contracts with U.S. WeFederal ~~expect~~government clients, including our NMCI contract, the government's ability to ~~reduce~~cancel ~~DSO~~the bycontract ~~several~~or ~~days~~impose additional terms and conditions due to changes in government funding, deployment schedules, military action or otherwise; our ability to access the ~~fourth~~capital markets, ~~quarter~~including our ability to aobtain ~~more~~capital leases, surety bonds and ~~normalized~~letters ~~year~~of credit; the impact of third-~~end~~party ~~level~~benchmarking provisions in certain client contracts; the impact on a historical and prospective basis of accounting ~~approximately~~rules 56and aspronouncements; ~~achieved~~the atimpact ~~December~~of 31claims, ~~2006.~~litigation and ~~The~~governmental investigations; the success of cost-cutting initiatives and the timing and amount of any resulting benefits; the impact of acquisitions and divestitures; a reduction in the carrying value of ~~DSO~~our toassets; ~~such~~the impact of a bankruptcy ~~level~~or isfinancial andifficulty ~~important~~of ~~element~~a significant client on the financial and other terms of our ~~ability~~agreements with that client; with respect to the funding of ~~achieve~~pension plan obligations, the performance of our ~~free~~investments ~~cash~~relative ~~flow~~to ~~guidance~~our assumed ~~for~~rate ~~2007.~~of ~~Days~~return; ~~payable~~changes ~~outstanding~~in ~~were~~tax 24laws and interpretations and failure to ~~days~~obtain attreaty ~~September 30~~relief from double taxation; failure to obtain or protect intellectual property rights; fluctuations in foreign currency, exchange rates and interest rates; the impact of competition on pricing, revenues and margins; the degree to which third parties continue to outsource IT and business processes; and the factors discussed elsewhere in this Form 10‑Q and under the heading Risk Factors in Item 1A to Part I of our 2007 ~~compared~~Form 10-K. We disclaim any intention or obligation to 21update ~~days~~or atrevise ~~December 31~~any forward-looking statements whether as a result of new information, ~~2006~~future events or otherwise, except as may be required by law.

~~Total~~ITEM ~~debt was $3~~4.3 ~~billion~~CONTROLS atAND September 30, 2007 compared to $3.1 billion at December 31, 2006. The increase in total debt was attributable principally to a real estate financing transaction associated with a client contract and increased equipment and software financing. Total debt consists of notes payable and capital leases. The total debt-to-capital ratio (which includes total debt and minority interests as components of capital) was 28% at September 30, 2007 and December 31, 2006. PROCEDURES

~~Off-Balance~~ Disclosure Controls ~~Sheet Arrangements~~ and ~~Contractual Obligations~~Procedures

~~In connection with certain service contracts, we may arrange~~ aEDS evaluated ~~client~~the ~~supported~~effectiveness ~~financing~~of ~~transaction~~the ~~("CSFT")~~design ~~with our client~~ and ~~an independent~~operation ~~third-party~~of ~~financial institution or~~ its ~~designee. In CSFTs, client~~disclosure ~~payments~~controls ~~are~~and ~~made~~procedures ~~directly~~as toof the ~~financial~~end ~~institution~~of ~~providing~~ the ~~financing.~~ Ifperiod ~~the~~covered ~~client~~by ~~does~~this ~~not~~report. This ~~make~~evaluation ~~the~~was ~~required~~performed ~~payments~~ under the ~~service contract,~~supervision ~~under~~and nowith ~~circumstances~~the ~~do we have an ultimate obligation to acquire~~participation ~~the~~of ~~underlying assets unless~~ our ~~nonperformance~~management, ~~under~~including the ~~service~~Chief ~~contract would~~Executive ~~permit~~Officer ~~its~~and ~~termination,~~Chief orFinancial Officer. weBased ~~fail~~upon totheir ~~comply~~evaluation, ~~with~~our ~~certain~~management, ~~customary~~including ~~terms~~our Chief ~~under~~Executive ~~the~~Officer ~~financing~~and ~~agreements,~~Chief ~~including,~~Financial ~~for example~~Officer, ~~covenants we~~ have ~~undertaken~~ ~~regarding~~concluded ~~the~~that ~~use of~~ the company's ~~assets~~disclosure ~~for~~controls ~~their~~and ~~intended~~procedures ~~purpose.~~were Weeffective ~~consider the~~as ~~possibility~~ of ~~our~~the ~~failure~~end ~~to comply with any~~ of the ~~these~~period ~~terms~~covered toby bethis ~~remote~~report.

~~At September 30, 2007, there were outstanding an aggregate of~~ ~~$103 million under CSFTs yet to be paid by our clients. No additional asset~~Internal ~~purchases~~Control ~~are~~Over ~~expected~~Financial to be financed under existing arrangements. In the event a client contract is terminated due to nonperformance, we would be required to acquire only those assets associated with the outstanding amounts for that contract. Net of repayments, the estimated future maximum amount outstanding under existing financing arrangements is not expected to exceed $200 million. We believe we have sufficient alternative sources of capital to directly finance the purchase of capital assets to be used for our current and future client contracts without the use of these arrangements. Reporting

~~Contractual~~Management ~~obligations~~is responsible for establishing and maintaining adequate internal control over financial reporting. ~~Following~~Our internal control over financial reporting is adesigned ~~summary~~to provide reasonable assurance regarding the reliability of financial reporting and the preparation of ~~payments~~financial ~~due~~statements for external purposes in ~~specified~~accordance ~~periods~~with ~~related~~generally accepted toaccounting ~~our~~principles. ~~contractual~~Management ~~obligations~~has asevaluated ofchanges ~~September~~in our ~~30,~~internal ~~2007,~~control ~~including~~over ~~payments~~financial ~~made~~reporting during the ~~first~~three ~~nine~~ months ofended ~~2007 and~~March ~~payments~~31, ~~due~~2008. Based on this evaluation, we have identified no change in ~~the~~our internal ~~remaining~~control over financial reporting that occurred during the three months ended ofMarch ~~2007~~31, ~~(in~~2008, ~~millions):~~ that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

			Payments Made / Due by Period
	Total		2007		2008-2009		2010-2011		After 2011
Long-term debt, including current portion and interest(1)	$	5,216	$	380	$	1,363	$	1,084	$	2,389
Operating lease obligations	1,918		367		726		420		405
Purchase obligations(2)	3,113		1,432		1,258		421		2
Total(3)	$	10,247	$	2,179	$	3,347	$	1,925	$	2,796

~~(1) Amounts~~PART represent the expected cash payments (principal and interest) of our long-term debt and do not include any fair value adjustments or bond premiums or discounts. Amounts also include capital lease payments (principal and interest). II

~~(2) Purchase~~ITEM obligations include material agreements to purchase goods or services, principally software and telecommunications services, that are enforceable and legally binding on EDS and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction1. ~~Purchase~~ ~~obligations~~LEGAL exclude agreements that are cancelable without penalty. Purchase obligations also exclude our obligation to repurchase minority interests in joint ventures, including our obligation to repurchase Towers Perrin's minority interest in ExcellerateHRO. PROCEEDINGS

~~(3) We~~ The information ~~expect~~set toforth ~~contribute approximately~~above ~~$135~~under ~~million~~the toheading ~~our~~"Pending ~~qualified~~Litigation and Proceedings" ~~nonqualified pension plans~~ in ~~2007,~~ ~~including~~Note ~~discretionary~~12 ~~and~~of ~~statutory~~the ~~contributions.~~"Notes ~~Our U.S. funding policy is~~ to ~~contribute~~Unaudited ~~amounts~~Condensed ~~that fall within the range of deductible contributions~~Consolidated ~~for~~Financial ~~U.S.~~Statements" ~~federal~~in ~~income~~this ~~tax~~Form ~~purposes.~~10-Q ~~See~~is ~~Note~~incorporated 9herein ofby ~~the accompanying condensed consolidated financial statements for additional information about our retirement plans~~reference.

19ITEM 1A. RISK FACTORS

~~Liquidity~~ In addition to the other information set forth in this Form 10-Q and ~~Capital~~our ~~Resources~~2007 Form 10-K, you should carefully consider the risk factors associated with our business discussed under the heading "Risk Factors" in Part I, Item 1A of our 2007 Form 10-K. There has been no material changes to the risk factors discussed in our 2007 Form 10-K.

~~Following~~ The risks isdiscussed ain ~~summary~~our of2007 ~~our~~Form ~~cash~~10-K ~~flows~~are ~~for~~not the ~~nine~~only ~~months~~risks we face. ~~ended~~Additional ~~September~~risks 30and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, ~~2007~~financial condition and/or ~~2006~~results (of operations in ~~millions):~~ the future.

	2007		2006
Net cash provided by operating activities	$	1,183	$	1,196
Net cash used in investing activities	(719)		(453)
Net cash used in financing activities	(386)		(681)
Free cash flow	329		495

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Operating activities. The decrease in net cash provided by operating activities in 2007 compared to 2006 was due to a $387 million increase in cash provided by earnings~~ (~~i.e., net income less non-cash operating items~~c) ~~and a $400 million decrease in operating assets and liabilities.~~ The ~~change~~following intable ~~operating~~provides ~~assets~~information ~~and liabilities resulted primarily~~about ~~from~~purchases a $392 million net decrease in amounts collected from customers but not yet earned, a $140 million net increase in vendor payments and a $116 million net increase in deferred contract costs. The decrease in cash in 2007 resulting from changes in the aforementioned operating assets and liabilities was partially offset by ~~less~~EDS ~~cash~~of ~~used~~shares ~~for~~of ~~taxes~~its incommon ~~2007,~~stock ~~primarily~~during ~~resulting from higher tax payments to~~ the ~~IRS~~three inmonths ~~2006~~ended ~~associated with tax audit issues~~March 31, ~~and a decrease in deferred tax assets in the first half of 2007~~2008. The net decrease in amounts collected from customer but not yet earned in 2007 resulted primarily from a $100 million payment from NMCI and a $270 million payment from another government client in 2006. The increase in deferred contract costs and vendor payments was primarily associated with the ramp-up of certain large contracts.

~~Investing~~Purchases ~~activities. The increase in net cash used in investing activities in 2007 compared to 2006 was primarily due to a decrease in net proceeds from sales~~ of ~~marketable securities resulting from a change in~~ ~~our~~Equity ~~investment~~Securities ~~strategy implemented in 2006, partially offset~~ by a decrease in acquisition payments (see Note 12 in the accompanying Notes to Unaudited Condensed Consolidated Financial Statements). Net proceeds from divested assets in 2007 includes the collection of a $52 million promissory note related to the sale of A.T. Kearney. EDS

Financing activities. The decrease in net cash used in financing activities in 2007 compared to 2006 was primarily due to a decrease in debt repayments and purchases of treasury stock, partially offset by an decrease in cash provided by employee stock transactions.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
January 1 - 31, 2008	1,150,000		$20.05	1,150,000	$920,000,000
February 1 - 29, 2008	10,350,000		$18.31	10,350,000	$730,000,000
March 1 - 31, 2008	-		-	-	$730,000,000
Total	11,500,000			11,500,000

~~Free~~ On December ~~cash~~4, ~~flow.~~2007, Weour ~~reported~~Board ~~free cash flow~~ of ~~$329 million~~Directors ~~for~~authorized the ~~nine~~repurchase ~~months~~of ~~ended~~up ~~September 30, 2007, compared~~ to $~~495 million~~1 ~~for~~billion ~~the~~of ~~nine~~our ~~months~~outstanding ~~ended~~common ~~September~~stock ~~30,~~over ~~2006.~~the Wenext ~~define~~18 ~~free~~months ~~cash~~in ~~flow~~open ~~as net~~market ~~cash~~purchases ~~provided~~or byother ~~operating activities, less capital expenditures~~transactions. ~~Capital expenditures~~As ~~is the sum~~ of ~~(i)~~March ~~net cash used in investing activities~~31, ~~excluding proceeds from sales of marketable securities~~2008, ~~proceeds~~we ~~related~~had topurchased ~~divested~~an ~~assets~~aggregate ~~and non-marketable equity investments, payments for acquisitions, net~~ of ~~cash~~ ~~acquired, and non-marketable equity investments, and payments for purchases of marketable securities, and (ii) payments on capital leases~~14.2 ~~Free cash~~million ~~flow~~shares ~~excludes~~pursuant ~~items~~to ~~that~~this ~~are~~share ~~actual expenditures that impact cash~~repurchase ~~available~~authorization toat ~~us for other uses and should not be considered~~ a ~~measure~~cost of ~~liquidity~~ orapproximately an$270 ~~alternative to the cash flow measurements required by GAAP, such as net cash provided by operating activities or net increase/decrease in cash and cash equivalents~~million. WeThe ~~may~~foregoing ~~not~~table ~~define free cash flow in the same manner~~does ~~as other companies and, accordingly, the free cash flow we report may~~ not ~~be comparable~~include toshares ~~similarly~~tendered ~~titled measures reported by other companies. We refer you~~ to satisfy the ~~discussion~~exercise ofprice ~~free cash flow~~ in ~~"Management's~~connection ~~Discussion and~~with ~~Analysis~~cashless ofexercises ~~Financial Condition and Results~~ of ~~Operations~~employee -stock ~~Non-GAAP~~options ~~Financial Measures"~~or inshares ~~our~~tendered ~~2006 Form 10-K. Our ability~~ to ~~achieve~~satisfy ~~our free cash flow~~tax ~~guidance~~withholding ~~for~~obligations ~~2007 is dependent~~ in ~~part~~connection ~~on our ability to maintain capital expenditures and working capital usage at levels consistent~~ with ~~our~~employee ~~forecast, including,~~equity ~~without limitation, the reduction of DSO to more normalized year-end levels as described above, as well as our ability to achieve our 2007 earnings per share guidance~~awards.

20ITEM 6. EXHIBITS

Following is a reconciliation of free cash flow to the net change in cash and cash equivalents for the nine months ended September 30, 2007 and 2006 (in millions):

	10.1	Form of Performance RSU Award Agreement for 2008 annual long-term incentive grant to executive officers, other than Ronald A. Rittenmeyer and William G. Thomas.
	10.2	Performance RSU Award Agreement for 2008 annual long-term incentive grant to Ronald A. Rittenmeyer.
	10.3	Performance RSU Award Agreement for 2008 annual long-term incentive grant to William G. Thomas.
	10.4	Form of Time Vesting RSU Award Agreement for 2008 annual long-term incentive grant to executive officers, other than Ronald A. Rittenmeyer and William G. Thomas.
	10.5	Time Vesting RSU Award Agreement for 2008 annual long-term incentive grant to Ronald A. Rittenmeyer.
	10.6	Time Vesting RSU Award Agreement for 2008 annual long-term incentive grant to William G. Thomas.
	10.7	Form of Stock Option Award Agreement for 2008 annual long-term incentive grant to executive officers, other than William G. Thomas.
	10.8	Stock Option Award Agreement for 2008 annual long-term incentive grant to William G. Thomas.
	10.9	Deferred Stock Unit Award Agreement dated February 13, 2008 between EDS and William G. Thomas.
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	2007		2006
Net cash provided by operating activities	$	1,183	$	1,196
Capital expenditures:
Proceeds from investments and other assets	63		216
Net proceeds from real estate sales	28		49
Payments for purchases of property and equipment	(531)		(510)
Payments for investments and other assets	-		(37)
Payments for purchases of software and other intangibles	(313)		(338)
Other investing activities	24		28
Capital lease payments	(125)		(109)
Total net capital expenditures	(854)		(701)
Free cash flow	329		495
Other investing and financing activities:
Proceeds from sales of marketable securities	-		1,985
Net proceeds (payments) from divested assets and non-marketable equity securities	53		(11)
Payments for acquisitions, net of cash acquired, and non-marketable equity securities	(40)		(352)
Payments for purchases of marketable securities	(3)		(1,483)
Proceeds from long-term debt	5		-
Payments on long-term debt	(10)		(209)
Purchase of treasury stock	(334)		(502)
Employee stock transactions	142		203
Dividends paid	(77)		(78)
Other financing activities	13		14
Effect of exchange rate changes on cash and cash equivalents	12		(1)
Net increase in cash and cash equivalents	$	90	$	61

Covenants. On June 30, 2006, we entered into a $1 billion Five Year Credit Agreement (the "Credit Agreement") with a bank group including Citibank, N.A., as Administrative Agent for the lenders, and Bank of America, N.A., as Syndication Agent. At September 30, 2007, there were no amounts outstanding under the Credit Agreement. The Credit Agreement contains certain financial and other restrictive covenants which would allow any amounts outstanding thereunder to be accelerated, or restrict our ability to borrow thereunder, in the event of our noncompliance. Following is a summary of such covenants and the calculated ratios at September 30, 2007: SIGNATURES

	Covenant	Actual
Leverage ratio	≤ 3.00	1.12
Interest coverage ratio	≥ 3.00	13.07

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Credit ratings. Following is a summary of our senior long-term debt credit ratings by Moody's Investor Services, Inc. ("Moody's"), Standard & Poor's Rating Services ("S&P") and Fitch Ratings ("Fitch") at September 30, 2007:



Dated: April 30, 2008	By: /S/ RONALD P. VARGO
	Ronald P. Vargo
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)


Dated: April 30, 2008	By: /S/ WILLIAM E. CASPER
	William E. Casper
	Corporate Controller
	(Principal Accounting Officer)

	Moody's	S&P	Fitch
Senior long-term debt	Ba1	BBB-	BBB-
Outlook	Positive	Stable	Positive

At September 30, 2007, we had no recognized or contingent material liabilities that would be subject to accelerated payment due to a ratings downgrade. We do not believe a negative change in our credit rating would have a material adverse impact on us under the terms of our existing client agreements.

Liquidity. At September 30, 2007, we had total liquidity of $3.8 billion, comprised of unrestricted cash and marketable securities of $3.0 billion and availability under our unsecured credit facilities of $819 million. Management currently intends to maintain unrestricted cash and marketable securities in an amount equal to at least 12 months of forecasted capital expenditures (as defined under "Free Cash Flow" above), interest payments, debt maturities and dividend payments.

New Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This new standard will allow companies to elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings in each reporting period. The new standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the requirements of Statement No. 159 and have not yet determined the impact on our consolidated financial statements.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This new standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The new standard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. The provisions of the new standard are to be applied prospectively for most financial instruments and retrospectively for others as of the beginning of the fiscal year in which the standard is initially applied. We will be required to adopt this new standard in the first quarter of 2008.

We adopted FIN 48 effective January 1, 2007. We refer you to "Results of Operations" above for additional information about this accounting change.

Cautionary Statement Regarding Forward-Looking Statements

Except for the historical information and discussions contained herein, statements contained in this Form 10-Q may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding future financial performance, TCV of new contract signings and other forward-looking financial information. Any forward-looking statement may rely on a number of assumptions concerning future events and be subject to a number of uncertainties and other factors, many of which are outside our control, that could cause actual results to differ materially from such statements. These factors include, but are not limited to, the following: the performance of current and future client contracts in accordance with our cost, revenue and cash flow estimates, including our ability to achieve any operational efficiencies in our estimates; for contracts with U.S. Federal government clients, including our NMCI contract, the government's ability to cancel the contract or impose additional terms and conditions due to changes in government funding, deployment schedules, military action or otherwise; our ability to access the capital markets, including our ability to obtain capital leases, surety bonds and letters of credit; the impact of third-party benchmarking provisions in certain client contracts; the impact on a historical and prospective basis of accounting rules and pronouncements; the impact of claims, litigation and governmental investigations; the success of cost-cutting initiatives and the timing and amount of any resulting benefits; the impact of acquisitions and divestitures; a reduction in the carrying value of our assets; the impact of a bankruptcy or financial difficulty of a significant client on the financial and other terms of our agreements with that client; with respect to the funding of pension plan obligations, the performance of our investments relative to our assumed rate of return; changes in tax laws and interpretations and failure to obtain treaty relief from double taxation; failure to obtain or protect intellectual property rights; fluctuations in foreign currency, exchange rates and interest rates; the impact of competition on pricing, revenues and margins; the degree to which third parties continue to outsource IT and business processes; and the factors discussed elsewhere in this Form 10‑Q and under the heading Risk Factors in Item 1A to Part I of our 2006 Form 10-K. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by law.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

EDS evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based upon their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Commencing in the first quarter of 2007, we transitioned certain transaction and journal entry processing and preparation of general ledger account reconciliations from the existing accounting workforce to a newly hired workforce in lower cost Best Shore® locations. This transition was completed during the third quarter of 2007. We expect these actions will improve our internal controls over financial reporting by enabling us to conform general ledger processing to a single, global standard and operate a more centralized accounting function. We have taken steps to mitigate the control risks created by these actions, including establishment of monitoring controls and workforce management and training programs.

Management has evaluated changes in our internal control over financial reporting during the three months ended September 30, 2007. Based on this evaluation, other than the actions referred to in the immediately preceding paragraph, we have identified no change in our internal control over financial reporting that occurred during the three months ended September 30, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

The information set forth above under the heading "Pending Litigation and Proceedings" in Note 11 of the "Notes to Unaudited Condensed Consolidated Financial Statements" in this Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Form 10-Q and our 2006 Form 10-K, you should carefully consider the risk factors associated with our business discussed under the heading "Risk Factors" in Part I, Item 1A of our 2006 Form 10-K. There has been no material changes to the risk factors discussed in our 2006 Form 10-K.

The risks discussed in our 2006 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or results of operations in the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) We did not purchase any Common Stock during the three months ended September 30, 2007 (other than shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax withholding obligations in connection with employee equity awards), and did not have any authorized share repurchase program in effect during that period.

ITEM 6. EXHIBITS

	10.1	Time-Vesting Restricted Stock Unit Award Agreement between EDS and Ronald A. Rittenmeyer dated August 1, 2007.
	10.2	Change of Control Employment Agreement between EDS and Michael H. Jordan, dated August 15, 2007.
	10.3	Change of Control Employment Agreement between EDS and Ronald A. Rittenmeyer dated August 8, 2007.
	10.4	Change of Control Employment Agreement between EDS and Jeffrey M. Heller dated August 20, 2007.
	10.5	Change of Control Employment Agreement between EDS and Charles S. Feld dated September 17, 2007.
	10.6	Change of Control Employment Agreement between EDS and Ronald P. Vargo dated October 4, 2007.
	10.7	Executive Severance Benefit Agreement between EDS and Ronald A. Rittenmeyer effective August 8, 2007.
	10.8	Executive Severance Benefit Agreement between EDS and Charles S. Feld effective September 17, 2007.
	10.9	Executive Severance Benefit Agreement between EDS and Ronald P. Vargo effective October 4, 2007.
	10.10	Form of Performance RSU Award Agreement for 2005 and 2006 grants to executive officers (other than Michael H. Jordan, Jeffrey M. Heller and Ronald A. Rittenmeyer).
	10.11	Form of Performance RSU Award Agreement for 2007 grant to executive officers (other than Michael H. Jordan, Jeffrey M. Heller and Ronald A. Rittenmeyer).
	10.12	Form of Performance RSU Award Agreement for 2005 and 2006 grants to Michael H. Jordan and Jeffrey M. Heller.
	10.13	Form of Performance RSU Award Agreement for 2007 grant to each of Michael H. Jordan and Jeffrey M. Heller.
	10.14	Form of Performance RSU Award Agreement for 2005 and 2006 grants to Ronald A. Rittenmeyer.
	10.15	Form of Performance RSU Award Agreement for 2007 grant to Ronald A. Rittenmeyer.
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 6, 2007	By: /S/ RONALD P. VARGO
	Ronald P. Vargo
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
Dated: November 6, 2007	By: /S/ WILLIAM E. CASPER
	William E. Casper
	Corporate Controller
	(Principal Accounting Officer)

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