Shares of EDS rose about 74 cents, or nearly 4 percent, to $21.72 in midday trading.

EDS said net income climbed to $225 million, or 42 cents per share in the quarter ended Sept. 30. That was up from $125 million, or 24 cents per share, a year earlier.

Analysts expected profit of 41 cents per share, according to Thomson Financial.

Revenue rose just over 6 percent, to $5.63 billion, but fell short of analysts' forecast of $5.65 billion.

Plano-based EDS said it signed contracts worth $5.7 billion in the quarter, up from $3.5 billion a year ago. Analysts watch contract signings as an indication of future revenue.

EDS has been trying to reduce its reliance on traditional aspects of information-technology outsourcing that are maturing. Instead, it has focused on faster-growing fields, such as application services -- in which EDS helps companies build and manage their information infrastructure.

On Friday, the company reiterated its key financial targets for 2007, but it said earnings per share would decline from $1.55-$1.60 this year to $1.35 next year. The company said revenue would grow 2 percent next year.

Chief Executive Ronald A. Rittenmeyer said there were several reasons for the cautious outlook, including the war in Iraq.

Rittenmeyer cited Verizon Communications Inc.'s early termination this year of a $12.4 billion deal with EDS, other companies taking longer to approve contracts, and "funding issues" among U.S. government clients.

"The government is still balancing money relative to the war effort versus other things," Rittenmeyer said.

EDS is trying to slow spending by cutting some jobs and moving others to low-cost countries, notably India, where it now has 25,000 workers. EDS ended the quarter with 40,000 workers in what it calls "bestshore" locations, up from 32,000 at the start of the year.

In September, EDS offered early-retirement payments to 12,000 U.S. workers, and 2,400 took them, which officials said would result in a fourth-quarter charge against earnings of 17 cents per share.

At the time the retirement offers were announced, the company said it employed 136,000 employees.

EDS plans to double its "workforce capacity reduction" program next year, and Rittenmeyer, who became CEO in September, didn't rule out layoffs.

"We're going to continue on moving forward to restructure the business," he said. "People made their choice (on the early-retirement offers), and I'm happy for those who did. And for those who didn't, I'm sure there was a reason for that."

Company executives have talked for several quarters about acquisitions in growth areas, but Rittenmeyer said EDS is not interested in its troubled Dallas neighbor, Affiliated Computer Services Inc., which couldn't close a $6.2 billion buyout and had five directors quit this week.

Rittenmeyer said EDS would prefer to spend its cash on acquisitions rather than buying back its own shares, which he said would provide only "a short-term bump" in stock price.