Computer Sciences Wins UBS Deal - Analyst Blog

Virginia-based software major Computer Sciences Corporation (CSC) signed a 5-year information technology (IT) services deal with Swiss bank UBS AG (UBS).

As per the terms of the deal, Computer Sciences will provide extensive services (networking, security and telecommunications) in support of UBS’ voice and data needs.

The total deal value, considering the full service tenure of 5 years, is $580 million. Although the deal value is not exciting in itself, considering the company’s quarterly turnover, CSC’s business has grown in the recent past through a steady flow of these small contracts. In addition, the win could attract other players such as UBS, strengthening the company’s position in the financial services vertical.

Computer Sciences has already won a large number of contracts from both Government organizations and private companies. These have facilitated Computer Sciences to achieve new heights in its business by scaling up business volume.

Apart from IT contract wins, we are also encouraged by Computer Sciences’ continuous efforts in other areas.

For example, Computer Sciences entered into the cyber space with the launch of a website that provides ready information regarding the safeguard of businesses from cyber threats.

Cloud computing is another area where Computer Sciences is pursuing aggressively, as is evident from the recent introduction of CloudLab, a new development and test service mechanism operational on the cloud computing platform.

Computer Sciences reported upbeat fourth quarter results and provided a positive outlook for fiscal 2010. Computer Sciences is constantly growing through acquisitions that enhance its portfolio and expand its operations in new markets. It has a steady flow of new businesses, especially in the government vertical and is financially sound.

On the other hand, we are a bit concerned about intense competition in the IT and cloud computing space from players such as Accenture Inc. (ACN) and Hewlett-Packard Co. (HPQ). Furthermore, Computer Sciences’ high exposure to U.S. government contracts needs some diversification since it may limit margin expansion possibilities.

We have a short-term Hold rating with a Zacks #3 Rank on Computer Sciences.
Read the full analyst report on "CSC"
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