May 20, 2015
Technology solutions provider Computer Sciences Corp. (CSC), which has offered itself up for sale unsuccessfully a number of times in the past few years, confirmed it will split its public sector and commercial businesses into two separate publicly-held entities.
The Falls Church, VA-based company timed word of the split to coincide with its scheduled FQ4 and full year 2015 earnings release on May 19. For FQ4 2015, CSC reported a 13 percent slide in revenue to $2.91 billion and net income of $9 million, or $0.06 a share, a precipitous tumble from the $270 million or $1.81 a share the company posted at the same time last year. Both earnings and revenue results for the quarter fell well below analysts’ expectations.
CSC stock closed down slightly in trading on Tuesday, May 19 but jumped nearly 5 percent to $71 in after hours trading. CSC’s market capitalization stands at $9.54 billion.
“CSC began its turnaround three years ago,” said CSC chief executive Mike Lawrie. “That turnaround has progressed strongly, and our focus now turns to positioning the business for long-term growth and leadership,” he said. “The best way to accelerate that transformation is by separating the company into two businesses, each uniquely positioned to lead its market by focusing strongly on the needs of its clients.”
The new commercially-centric company will be called CSC Global Commercial, aiming its sales efforts at Fortune 1000 companies and non-U.S. government clients. CSC’s commercial business unit produced $8.1 billion in sales in FY 2015 and employs 51,000 people.
CSC’s government agency-focused operation will be called CSC U.S. Public Sector and will provide mission-specific IT, infrastructure and business services to U.S. federal, state and defense agencies. CSC’s public sector business posted FY 2015 revenues of $4.1 billion and employs 14,000 people.
Lawrie said the timing for the split is right, with the company on the back-end of a three-year campaign to implement a common operating model, streamline its cost structure, improve its go-to-market performance and bring in new leadership.
“Our analysis shows significant benefits of going with a pure-play strategy,” Lawrie said. “We expect this change to enable both businesses to enhance innovation and improve delivery, in ways that are consistent with the rate and pace of the markets they serve.”
In the meantime, CSC said it will operate on a “business as usual” basis while it works out the details of the split, including leadership and locations.
CSC said it will pay a special cash dividend to shareholders of $10.50 per share at closing, which is expected by October 2015. Completion of the split will not require shareholder approval but is subject to approval of the board and other considerations, CSC said.
Following the split, CSC shareholders will own shares in both CSC Global Commercial and CSC U.S. Public Sector.
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