New deals continue to flow for Computer Sciences Corporation (CSC) as the company recently won a 10-year contract worth more than $900 million from a U.S-based global multi-brand commercial products manufacturer, which offers information technology and infrastructure managed services.
Through this deal, the new client expects to improve the overall efficiency and service level of its IT function by leveraging CSC’s expertise and global network of delivery centers.
As per the terms of the agreement, the tech major will come up with new IT solutions covering a major portion of the global infrastructure managed services, including service desk, end user support services, network services, data center services, distributed computing services and security services.
Apart from this deal, the company has signed a number of insurance deals, which are expected to drive revenue growth going forward.
Moreover, CSC recently witnessed a major inflow of funds from the settlement of a federal contract dispute. The case filed by the company was pending with the Armed Services Board of Contract Appeals since November 2010. At that time, the government and Computer Sciences agreed to put their claims on hold and enter into non-binding discussions to resolve the claims and other issues related to the contract.
Under the terms of the settlement, Computer Sciences will receive a one-time cash compensation of $277.0 million as well as a five-year contract extension worth approximately $1.0 billion for each extension. The original contract for providing systems support is set to expire at the end of this year.
This apart, the Canadian arm of CSC recently inked a service agreement with Citizenship and Immigration Canada (CIC) for two years, with an option of extending it for another year. Financial details of the deal were not disclosed.
Moreover, CSC has a large project pipeline and continues to win new projects at regular intervals; the most recent one being the 5-year information technology (IT) outsourcing contract renewal from the Italy-based defense electronics company SELEX Galileo, valued at $200.0 million. Per the terms of the contract, Computer Sciences will extend its full range of IT services to support SELEX Galileo’s IT eco-system.
The company reported decent first quarter 2012 results on the back of its new business wins. However, intense competition in the IT and cloud computing space from both small and big players, such as Accenture plc (ACN) and Hewlett-Packard Company (HPQ) remains a concern.
Moreover, as government orders are expected to dry up to a certain extent due to spending cuts and the postponement of NHS (National Health Services) realization to future quarters, things look difficult for the company. Additionally, demand for its products in Europe could remain gloomy in the near term.
Currently, Computer Sciences has a Zacks #5 Rank, implying a short-term Strong Sell recommendation.
