Leading technology solutions provider CSC Inc. (CSC) is rolling out new products and services. The company recently released new web-based software called Vendor Solutions Suite. The new software suite is expected to improve vendor management in large firms by automating the process and identifying key metrics that could help improve the efficiency of the system and reduce costs.
A macro view of this software suite indicates that it will facilitate the process of relationship management with vendors, helping to choose between vendors after an assessment of related costs and determining the effectiveness of an existing relationship.
The Vendor Solutions Suite will be compatible with CSC’s Legal Solutions Suite, which is already in use by 50 companies to manage 7000 law firm relationships.
Moreover, the technology major has also introduced CSC Enterprise Print Solutions, which transforms traditional printing service into transactional business processes. This technology has been introduced recently in partnership with Xerox Corporation (XRX).
The order flow for CSC remains decent, but there are some issues that could affect its earnings going forward. Government spending, which forms a major chunk of the company’s revenues, may be restricted by budget control. This apart, the U.K. NHS contract of about $400 million is also under review before being awarded to the company. Although orders from the Department of Defense may flow without interruption, the increasing scrutiny by the Government department of existing contracts may pose certain challenges.
While the company is expected to grow in the medium to long term, certain issues affecting CSC make us slightly apprehensive. The company has a limited number of indigenous products, which may result in some margin pressure as a number of large and small competitors are entering the IT and professional services market.
However, considering the steady growth in bookings and CSC’s exploration of new business areas, we are reiterating our Neutral rating. The short-term rating remains Hold, as denoted by the Zacks #3 Rank.
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